Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2019 GILBERT, AZ TABLE OF CONTENTS INSTRUCTIONS FOR NAVIGATING IN THE “COMPREHENSIVE ANNUAL FINANCIAL REPORT” PDF Files  Bookmarks for major sections are provided in the navigation pane on the left. Click on the bookmark to jump directly to that section.  If a “+” sign is at the left of a bookmark, click on the “+” to bring up subheadings.  All pages are linked to the Table of Contents. To jump to a specific page or subsection from the Table of Contents, put the pointer finger on the title or page number within and click the mouse.  Click the “Table of Contents” text located in the top right hand corner of any page or click the Table of Contents bookmark on the left. TABLE OF CONTENTS TABLE OF CONTENTS Comprehensive Annual Financial Report Year Ended June 30, 2019 Jenn Daniels, Mayor Eddie Cook, Vice Mayor Aimee Yentes, Council Member Brigette Peterson, Council Member Jared Taylor, Council Member Jordan Ray, Council Member Scott Anderson, Council Member Patrick Banger, Manager Prepared by the Finance & Management Services Department Håkon Johanson, Finance & Management Services Director TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2019 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal Advisory Organizational Chart Organizational Reporting Chart 1 8 9 FINANCIAL SECTION Independent Auditor's Report 11 Management's Discussion and Analysis (required supplementary information) 13 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities 25 26 Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual -Streets Special Revenue Fund Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Position - Fiduciary Funds Statement of Changes in Fiduciary Net Position - Fiduciary Funds Notes to the Financial Statements Required Supplementary Information Schedule of the Proportionate Share of the Net Pension Liability - ASRS Schedule of Changes in the Net Pension Liability and Related Ratios - PSPRS - Police Schedule of Changes in the Net Pension Liability and Related Ratios - PSPRS - Fire Schedule of Pension Contributions - ASRS Schedule of Pension Contributions - PSPRS Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios Notes to Pension Plan Schedules - Actuarially Determined Contribution Rates - PSPRS Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds Schedules of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual: Grants Special Revenue Fund Special Districts Special Revenue Fund Other Special Revenue Funds Other Capital Projects Fund 28 31 32 35 36 37 38 40 42 44 45 47 88 89 90 91 92 93 94 96 98 102 103 104 105 TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2019 TABLE OF CONTENTS Page General Debt Service Fund Special Assessments Debt Service Fund Streets and Traffic Capital Projects Fund Parks Capital Project Fund Municipal Facilities Capital Projects Fund Schedules of Revenues, Expenses and Changes in Net Position Budget and Actual: Water Enterprise Fund Wastewater Enterprise Fund Environmental Services Enterprise Fund Combining Statement of Net Position - Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Position - Internal Service Funds Combining Statement of Cash Flows - Internal Service Funds Schedules of Revenues, Expenses and Changes in Net Position Budget and Actual: Equipment Maintenance Internal Service Fund Employee Benefit Self-Insurance Internal Service Fund Agency Funds Combining Statement of Changes in Assets and Liabilities STATISTICAL SECTION Financial Trends Net Position by Component - Last Ten Fiscal Years Changes in Net Position - Last Ten Fiscal Years Program Revenues by Function - Last Ten Fiscal Years Fund Balances of Governmental Funds - Last Ten Fiscal Years Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years Revenue Capacity Sales Tax Collections by Category - Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt - As of June 30, 2019 Legal Debt Margin Information - Last Ten Fiscal Years Pledged-Revenue Coverage - Last Ten Fiscal Years Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers - Current Fiscal Year and Nine Years Ago Operating Information Full-time Equivalent Employees by Function - Last Ten Fiscal Years Operating Indicators by Function - Last Ten Fiscal Years Capital Asset Statistics by Function - Last Ten Fiscal Years Other information Property Value, Construction and Bank Deposits - Last Ten Fiscal Years System Development Fees - Fiscal Year 2019 Property Tax Levies and Collections - Last Ten Fiscal Years Principal Property Taxpayers - Fiscal Year 2019 106 107 108 109 110 111 112 113 116 117 118 119 120 122 125 126 128 129 130 131 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 TABLE OF CONTENTS Introductory Section ________________________________ Letter of Transmittal Advisory Organization Chart Organization Reporting Chart TABLE OF CONTENTS February 24, 2020 Honorable Mayor, Members of the Council, and Gilbert Citizens: I am pleased to submit to you the Comprehensive Annual Financial Report (CAFR) for the Town of Gilbert (Gilbert), for the fiscal year ended June 30, 2019. State law (Arizona Revised Statutes §9-481) requires that local governments publish a complete set of audited financial statements within six months of the close of each fiscal year. However, for this fiscal year, Gilbert received a two-month extension from the Government Finance Officers Association due to the implementation of a new financial software system. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any significant misstatements. Heinfeld, Meech & Company, a firm of licensed certified public accountants, has issued an unmodified opinion on Gilbert’s financial statements for the year ended June 30, 2019. The independent auditors’ report is located in the Financial Section of this report. This letter of transmittal is designed to complement Management’s Discussion and Analysis (MD&A) and should be read in conjunction with it. The MD&A can be found in the Financial Section of this report. GILBERT PROFILE Governmental Structure Gilbert is an Arizona Municipal Corporation, operating as a general law community as prescribed in the Arizona Revised Statutes. Gilbert was incorporated July 6, 1920, and operates under the CouncilManager form of government. The Mayor is a member of the Council and is elected by the voters for a four-year term. Six additional council members are elected at-large to staggered four-year terms. The Mayor is the chief executive officer and chairperson of the Council. The Town Manager (Manager) is appointed by the Council and serves as the chief administrative officer. During fiscal year 2019, the Manager administered Gilbert's operations through a staff of 1,395 budgeted full-time equivalent positions. Gilbert provides or administers a full range of services including police and fire protection, development services (planning, code enforcement, and engineering), public works (water, wastewater, environmental services, and streets), and parks and recreation services. Transit and “dial-a-ride” services are provided through an intergovernmental agreement with the Regional Public Transportation Authority. Library services, incarceration and animal control are provided through intergovernmental agreements with Maricopa County. Town of Gilbert | A Community of Excellence 50 E Civic Center Drive, Gilbert, AZ 85296 | Phone 480-503-6871 | Fax: 480 497-4943 | www.GilbertAz.gov 1 TABLE OF CONTENTS Geography and Population Gilbert is located in the southeastern section of the greater Phoenix metropolitan area in Maricopa County, bounded on the north and east by the City of Mesa, on the west by the City of Chandler, on the southeast by the Town of Queen Creek, and on the south by the Gila River Indian Community. Gilbert has a planning area of 72.6 square miles. The most recent estimate of population as of July 1, 2019 is 259,386, which was derived from Maricopa Association of Governments population estimates. The following graph depicts the ten-year population trend for Gilbert. FACTORS AFFECTING FINANCIAL CONDITION Growth and Construction There were 1,535 new residential permits and 155 commercial permits issued in fiscal year 2019, which represents a decrease from the prior fiscal year of 1,604 and 199, respectively. The total value of all new construction in fiscal year 2019, including commercial, was $746.3 million, an increase from $531.6 million in fiscal year 2018. System Development Fees (SDF’s) are collected for capital needs related to growth in the community. The Council has adopted SDF’s for police, fire, general government, traffic signals, parks and recreation, water resources, water, and wastewater. The fees are based on build-out system requirements to serve the projected population and land uses. During fiscal year 2019, a total of $40.2 million was collected in SDF’s compared to $36.6 million in fiscal year 2018. Economic Development With nearly 260,000 residents, Gilbert is focused on sustaining the thriving community seen today well into the future. This aim is supported through a commitment to develop a prosperous community, strong economy, and exceptional built environment. Over the past few years, Gilbert has received numerous awards and recognitions, a few of which are included below. • • • • • • • • AAA Bond rating from all three major rating agencies (S&P, Moody’s, and Fitch) Best City for Business in Arizona (Arizona Chamber of Commerce and Industry, 2019) Arizona's Fastest Growing City (WalletHub, 2018) Gilbert Tops List for Recovery in 100 Cities After Recession (Economic Innovation Group, 2018) #1 Safest City in Arizona, #6 in the Country (WalletHub, 2018) 3rd Most Livable City in the U.S. (SmartAsset, 2018) 3rd Best Place to Live in Arizona (Niche, 2018) 4th Best School District in America - Gilbert Public Schools (Alarms.org, 2018) 2 TABLE OF CONTENTS • • • • • 4th Best City to Buy a Family Home in the U.S. (SmartAsset, 2019) 5th Best Place to Find a Job in America (WalletHub, 2018) 7th Best Place to Raise a Family in the U.S. (WalletHub, 2019) 8th Best Midsize Real Estate Market in the U.S. (WalletHub, 2019) 20th Happiest Place to Live (WalletHub, 2018) Gilbert is a community committed to education; 44.0% of residents age 25 and older hold a bachelor’s degree or higher, compared with about 30.0% statewide and 32.5% nationally. Notable employers like Banner Health, Dignity Health, Banner MD Anderson Cancer Center, Go Daddy, the worldwide headquarters of Isagenix, Silent-Aire, Northrop Grumman, Lockheed Martin, and Deloitte benefit from this commitment to education and have helped keep Gilbert’s unemployment near 3.2%, as compared to approximately 4.3% for the state. Knowledge assets that support the community include Park University, the University of Arizona, Arizona State University Polytechnic Campus, Chandler-Gilbert Community College, A.T. Still University, and numerous other colleges, universities, and technical schools within a 30minute commute. Additionally, more than 30 charter/private schools and three A-rated school districts – Gilbert, Higley, and Chandler – serve the citizens of Gilbert. The Gilbert Office of Economic Development (OED) is one of approximately 65 Accredited Economic Development Organizations in the nation. Gilbert achieved this accreditation through the International Economic Development Council in 2013 and was the first Arizona economic development organization, and the second municipality in the nation, to do so. In fiscal year 2019, the business development lines of services saw strong performance, and Gilbert facilitated the attraction and expansion of a diverse mix of projects and property types. The 28 business development successes in fiscal year 2019 represent 1,537 new or expanded jobs, $367M in capital investment, and nearly 1.8M new or expanded square footage. These projects demonstrate the community’s continued commitment to creating the place where the market wants to invest. Investment in the Heritage District also continued with a focus on attracting businesses and developing critical infrastructure to support future growth. During fiscal year 2019, the Heritage District welcomed new restaurants, retailers, and higher education institutions. In addition to these new businesses, Hearne Plaza Garage opened in March 2019. This parking garage added nearly 600 additional parking spaces and six electric vehicle charging stations to the Heritage District. On the tourism front, Discover Gilbert continued its substantial efforts to expose new groups to Gilbert including partnering with the Arizona Office of Tourism, conducting familiarization tours, and hosting the Arizona Food and Farm Forum in partnership with the Local First Arizona Foundation. Marketing campaigns across a variety of media channels in the targeted markets generated over 4.5 million impressions, and Gilbert hotels saw room demand increase 31.6% from fiscal year 2018. Gilbert’s connectivity to major markets is provided through a comprehensive transportation network which includes the Santan Loop 202 and US-60 Superstition Freeways, Sky Harbor International Airport, and Phoenix-Mesa Gateway Airport. This network provides access to Gilbert-based businesses while connecting the community to local, national and international markets. Located just over 10 miles west of Gilbert, Phoenix Sky Harbor Airport is served by 17 airlines. Sky Harbor is one of the busiest airports in the nation for passenger traffic with over 100,000 passengers daily. Phoenix-Mesa Gateway Airport is located on Gilbert’s eastern border and handles over one million passengers yearly with flights to over 35 destinations throughout the United States. The airport also provides air cargo services and is located within a Foreign Trade Zone. 3 TABLE OF CONTENTS Transaction Privilege (Sales) Tax Trend Sales tax revenues represented 49.4% of General Fund revenues for fiscal year 2019, totaling approximately $98.7 million. Local sales taxes are collected by the Arizona Department of Revenue and remitted to Gilbert weekly. The following graph depicts sales tax receipts by source for the past five years. Property Taxes State law requires municipalities to adopt a property tax levy based on the amount of scheduled and projected debt service for the year plus a reasonable amount for delinquencies and certain costs. For fiscal year 2019, Gilbert’s property tax rate is $0.99 per $100 of limited property valuation and is used exclusively for the payment of voter approved general obligation bond debt. Gilbert does not levy a primary property tax for general operating purposes. Limited Property Value The limited property value of real property within the Gilbert annexed area is a vital economic forecast variable, as the State Constitution contains regulatory restrictions on the amount of debt a community may have outstanding based on limited property valuation. Taking the market value of a property and applying the statutory assessment rate derives the limited property value. Residential properties are assessed at 10%, vacant land is assessed at 16%, and commercial properties are assessed at 18%. This illustrates how crucial the additions of commercial properties are to the tax base. The limited property valuation increased by 7.1% in fiscal year 2019 from $2.106 billion to $2.256 billion. The following graph depicts the changes in the limited property valuation in Gilbert for the past ten years: 4 TABLE OF CONTENTS State-Shared Revenues State-shared revenues totaled $64.2 million for the General Fund and $16.6 million for the Streets Special Revenue Fund in fiscal year 2019, representing approximately 32.2% of total General Fund revenues and 97.4% of total Streets Special Revenue Fund revenues. State-shared revenues include allocations of state sales tax, income tax, gas tax, motor vehicle in-lieu tax, and lottery funds. These revenues are shared based upon relative population in the State as determined by the most recent population estimates of the United States Census Bureau. Budget and Financial Policies Gilbert’s financial policies establish the framework for overall fiscal planning and management. The policies set forth guidelines for both current activities and long range planning. The purposes of the financial policies are: Balanced Budget – Gilbert is required by Arizona Revised Statutes to adopt a balanced budget each fiscal year. A balanced budget is one in which the sum of estimated revenues and appropriated fund balances is equal to appropriations. Fiscal Conservatism – To ensure that Gilbert is at all times in solid financial condition, defined as: Maximum efficiency – best possible service at the lowest possible cost Cash solvency – the ability to pay bills Budgetary solvency – the ability to balance the budget Long-term solvency – the ability to pay future costs Service level solvency – the ability to provide needed and desired services Flexibility – To ensure Gilbert is in a position to respond to changes in the economy or new service challenges without an undue amount of financial stress. Transparency and Communication – To utilize best practices in communicating financial information to facilitate sound decision-making, to promote openness and transparency, and to inspire public confidence and trust. Adherence to the Highest Accounting and Management Practices – As set by the Governmental Accounting Standards Board and the Government Finance Officers Association standards for financial reporting and budgeting. A five-year financial plan is developed for each operating fund, and current year decisions are made with a forecasted future impact. Other financial policies that guide the budget include: maintaining a minimum general fund balance sufficient to cover 90 days of operating expenditures and the annual debt service payments; one-time revenues are not applied toward ongoing expenditures; and establishment of an economic development reserve. Gilbert’s Council adopted a comprehensive listing of policies of responsible financial management in November of 2011, with the latest revision in June of 2019. These policies are reviewed annually to ensure their continued relevance and adherence. Long-Term Financial Planning In addition to Gilbert’s General Plan and Capital Improvement Plan, Gilbert is developing infrastructure inventories (including repair and replacement plans) and functional area master plans. Gilbert staff and Council also align both short-term goals and resources toward the long-term realization of Gilbert’s established strategic focus areas: Strong Economy, Prosperous Community and Exceptional Built Environment, which will be discussed in more detail throughout the document. In fiscal year 2019, Gilbert proudly unveiled its new mission and “City of the Future” concept to anticipate change, create solutions and help people. Gilbert has implemented Franklin Covey’s The 4 Disciplines of Execution, providing an exceptional tool for advancing these goals while managing the challenges of the daily whirlwind, and Lean Six Sigma (Lean) process improvement events to optimize processes throughout the organization to further enhance Gilbert’s long-term financial resiliency. 5 TABLE OF CONTENTS 6 7 TABLE OF CONTENTS ADVISORY ORGANIZATIONAL CHART 8 TABLE OF CONTENTS ORGANIZATIONAL REPORT CHARTT Town Clerk Intergovernmental Relations Municipal Court Town Manager Town Attorney Chief Innovation Officer Digital Government Deputy Town Manager Deputy Town Manager Deputy Town Manager Economic Development Police Human Resources Parks and Recreation Fire and Rescue Information Technology Development Services Public Works Management and Budget Finance and Management Services Water Resources, CDBG, Emergency Management 9 10 TABLE OF CONTENTS Financial Section ________________________________ Independent Auditor’s Report Management’s Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Required Supplementary Information Combining and Individual Fund Statements and Schedules TABLE OF CONTENTS INDEPENDENT AUDITOR’S REPORT Honorable Mayor and Members of the Town Council Town of Gilbert, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, business-type activities, each major fund, and the aggregate discretely presented component unit and remaining fund information of Town of Gilbert, Arizona (Town), as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, each major fund, and the aggregate discretely presented component unit and remaining fund information of the Town of Gilbert, Arizona, as of June 30, 2019, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund and Streets Special Revenue Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. 11 TABLE OF CONTENTS Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, net pension liability information, and other postemployment benefit plan information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The accompanying supplementary information such as the Introductory Section, Combining and Individual Fund Statements and Schedules, and Statistical Section are presented for purposes of additional analysis and are not a required part of the financial statements. The Combining and Individual Fund Statements and Schedules, as listed in the table of contents, are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 24, 2020, on our consideration of Town of Gilbert, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to solely describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Town of Gilbert’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Town of Gilbert, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Tucson, Arizona February 24, 2020 12 TABLE OF CONTENTS MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the Town of Gilbert (Gilbert), we offer this narrative overview and analysis of Gilbert’s financial activities for the fiscal year ended June 30, 2019. We encourage readers to consider the information presented here in conjunction with information provided in the transmittal letter. Financial Highlights         Gilbert’s assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources at the end of the fiscal year by $1.8 billion, which is an increase over prior year of $92.3 million. Included in this amount, defined as net position, is $447.5 million of unrestricted net position, of which $176.9 million is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek, and $270.6 million which may be used to fund ongoing operations in future years. Net position includes a $792.9 million net investment in capital assets such as streets, parks, and municipal buildings and a $462.9 million net investment in water, wastewater and environmental services infrastructure and equipment. These amounts increased primarily due to the completion of various construction projects and regularly scheduled debt payments made during the fiscal year. The combined fund balance for all governmental funds is $247.5 million, of which $114.0 million is unrestricted. The General Fund unrestricted fund balance is $131.4 million, of which $41.6 million has been assigned for capital replacement and road maintenance. The General Fund unassigned balance of $89.8 million is approximately 57.5% of the total fund expenditures. Gilbert’s total bonded debt outstanding at the end of the fiscal year was $364.6 million, as compared to $406.8 million at the end of fiscal year 2018, which is a decrease of $42.2 million due to regularly scheduled debt payments made. Gilbert’s total net pension liability at the end of the fiscal year was $133.9 million, as compared to $144.1 million at the end of fiscal year 2018. Gilbert made contributions in excess of the annual require contribution to the Public Safety Personnel Retirement System (PSPRS) of $8.4 million during the fiscal year. Gilbert’s total other post-employment benefits (OPEB) liability at the end of the fiscal year was $896 thousand, as compared to $2.0 million at the end of fiscal year 2018. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to Gilbert’s basic financial statements, which are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the finances of Gilbert as a whole, in a manner similar to a private-sector business. The statement of net position presents information on all of Gilbert’s assets, liabilities, and deferred inflows/outflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether Gilbert’s financial position is improving or declining. The statement of activities presents the changes in net position from the previous year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g., earned but unused vacation leave). 13 TABLE OF CONTENTS Both of the government-wide financial statements distinguish functions of Gilbert that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover a majority or all of their costs through user fees and charges (business-type activities). The governmental activities of Gilbert include general government, public safety, highways and streets, parks and recreation, and transportation. The business-type activities include water, wastewater, and environmental services. The government-wide financial statements also include the Industrial Development Authority (Authority) as a component unit of Gilbert. The Authority provides financing for eligible private sector entities to acquire and construct facilities deemed to be in the public interest. The financial information for the Authority is presented separately in the statements. The government-wide financial statements can be found on pages 25-27 of this report. Fund financial statements A fund is a grouping of related accounts used to maintain control over resources segregated for specific activities or objectives. Gilbert, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of Gilbert’s funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds Governmental funds account for essentially the same functions reported as governmental activities in the government-wide financial statements. Unlike the government-wide financial statements, however, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at fiscal year end. This information may be useful in evaluating a government’s near-term financing ability. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of Gilbert’s near-term financing decisions. To facilitate this comparison, reconciliations are provided with the fund financial statements. The basic governmental fund financial statements can be found on pages 28-37. Proprietary Funds Gilbert maintains two different types of proprietary funds. Enterprise funds report the same functions presented as business-type activities in the government-wide financial statements, which include water, wastewater, and environmental services. Internal service funds accumulate and allocate costs internally among the various functions. Gilbert uses internal service funds to account for maintenance of its fleet of vehicles, and employee health and dental self-insurance. The assets and liabilities of the internal service funds are included in the governmental activities column of the government-wide statement of net position. Costs of internal service funds are allocated to the various user functions on the governmentwide statement of activities. Enterprise funds provide the same information as the government-wide financial statements, only with more detail. Internal service funds are combined into a single column on the proprietary funds statements. Additional detail for the internal service funds can be found on pages 116-120. The proprietary fund statements can be found on pages 38-43. Fiduciary Funds Fiduciary funds account for resources held for the benefit of parties outside the government. These funds are not included in the government-wide statements as these funds are not available to support Gilbert’s operations. 14 TABLE OF CONTENTS The fiduciary fund statements can be found on pages 44-45. Notes to the financial statements The notes to the financial statements provide additional information that is essential to obtain a full understanding of the data provided in the government-wide and fund financial statements and should be read with the financial statements. The notes to the financial statements can be found on pages 47-86. Government-wide Financial Analysis Net position serves as a useful indicator of a government’s financial position. The following table reflects the condensed Statement of Net Position as of June 30, 2019 and 2018. Condensed Statement of Net Position Current and other assets Capital assets Total assets Governmental Activities 2018, as 2019 restated $ 322,302,383 $ 332,097,921 1,006,398,307 985,881,412 1,328,700,690 1,317,979,333 Business-type Activities 2018, as 2019 restated $ 471,146,909 $ 484,532,991 599,455,880 555,951,132 1,070,602,789 1,040,484,123 Total 2018, as 2019 restated $ 793,449,292 $ 816,630,912 1,605,854,187 1,541,832,544 2,399,303,479 2,358,463,456 Deferred outflows of resources 51,579,122 48,665,850 5,904,975 5,732,620 57,484,097 54,398,470 Long-term liabilities Other liabilities Total liabilities 378,325,483 41,952,955 420,278,438 426,279,787 31,535,266 457,815,053 181,828,153 18,375,319 200,203,472 194,358,084 16,187,589 210,545,673 560,153,636 60,328,274 620,481,910 620,637,871 47,722,855 668,360,726 Deferred inflows of resources 11,783,291 5,905,423 2,839,109 1,369,007 14,622,400 7,274,430 Net position: Net investment in capital assets 792,863,888 772,450,144 Restricted 87,449,935 76,701,521 Unrestricted 67,904,260 53,773,042 Total net position $ 948,218,083 $ 902,924,707 462,857,212 410,466,937 30,971,975 34,499,382 379,635,996 389,335,744 $ 873,465,183 $ 834,302,063 1,255,721,100 1,182,917,081 118,421,910 111,200,903 447,540,256 443,108,786 $ 1,821,683,266 $ 1,737,226,770 Net position consists of three components. The largest portion of Gilbert’s net position (68.9%) is its investment in capital assets (land, buildings, equipment, infrastructure, etc.), less depreciation and any related debt used to acquire those assets that is still outstanding. Gilbert uses these capital assets to provide services to citizens; consequently, these assets are not available for appropriation. Although Gilbert’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt are provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of Gilbert’s net position (6.5%) represents resources that are subject to external restrictions on how they may be used. The remaining portion of net position (24.6%) includes $176.9 million which is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek and $270.6 million which may be used to meet the government’s ongoing obligations to citizens, customers, and creditors. 15 TABLE OF CONTENTS Governmental Activities Governmental activities in fiscal year 2019 increased Gilbert’s net position by $45.3 million. Taxes and program revenues (charges for services and grants and contributions that are clearly identifiable to operating functions) were Gilbert’s most significant revenue sources comprising 94.4% of total revenues for governmental activities. Taxes (local and state-shared) were $181.6 million, an increase of $6.5 million from the prior year. Program revenues were $84.0 million, an increase of $4.0 million from the prior year, which was mostly due to an increase in capital grants and contributions specifically related to police, fire, and parks system development fees collected. It should be noted that $9.6 million of the total program revenues represent capital contributions from developers of street related infrastructure and, therefore, were not cash revenues available to cover operating expenses. The other component of the change in net position is expenses. The largest expense functions were public safety, which represented 38.4%, and highways and streets, which represented 23.2% of total governmental activities expenses. Total expenses increased $8.8 million (3.9%) over the prior fiscal year. The following table details the changes in net position for governmental and business-type activities. Changes in Net Position Governmental Activities 2019 Business-type Activities Total 2018 2019 2018 2019 2018 Revenues Program revenues: Charges for services 17,821,966 $ 18,748,898 $ 94,827,129 $ 87,822,540 $ 112,649,095 $ 106,571,438 Operating grants and contributions $ 30,012,491 28,380,757 1,719,627 1,183,844 31,732,118 29,564,601 Capital grants and contributions 36,202,639 32,903,842 27,031,705 30,615,480 63,234,344 63,519,322 Sales taxes 98,647,781 97,306,846 - - 98,647,781 97,306,846 Property taxes 25,219,672 21,549,105 - - 25,219,672 21,549,105 Unrestricted state-shared revenue 53,776,642 52,192,543 - - 53,776,642 52,192,543 Other taxes 3,977,715 4,034,937 - - 3,977,715 4,034,937 restricted to specific programs 3,036,275 2,443,552 - - 3,036,275 2,443,552 Unrestricted investment earnings 10,152,812 1,549,131 11,493,742 1,894,199 21,646,554 3,443,330 General revenues: Grants and contributions not Other Total revenues 2,619,657 2,685,193 548,899 211,238 3,168,556 2,896,431 281,467,650 261,794,804 135,621,102 121,727,301 417,088,752 383,522,105 Expenses Management and policy 24,948,029 19,176,241 - - 24,948,029 19,176,241 Finance and management services 1,883,402 2,000,040 - - 1,883,402 2,000,040 Court 3,897,817 4,078,064 - - 3,897,817 4,078,064 Development services 9,448,543 10,311,997 - - 9,448,543 10,311,997 Police 55,328,243 54,116,887 - - 55,328,243 54,116,887 Fire 35,263,222 34,969,018 - - 35,263,222 34,969,018 Highw ays and streets 54,632,234 52,545,194 - - 54,632,234 52,545,194 Parks and recreation 35,840,421 29,985,036 - - 35,840,421 29,985,036 Transportation 886,089 1,151,199 - - 886,089 1,151,199 Non departmental 3,914,638 7,975,659 - - 3,914,638 7,975,659 Interest and fiscal charges 9,889,904 10,792,759 - - 9,889,904 10,792,759 Water on long-term debt - - 47,167,081 44,605,188 47,167,081 44,605,188 Wastew ater - - 27,843,727 27,244,229 27,843,727 27,244,229 Environmental services - - 21,688,906 18,182,971 21,688,906 18,182,971 235,932,542 227,102,094 96,699,714 90,032,388 332,632,256 317,134,482 45,535,108 34,692,710 38,921,388 31,694,913 84,456,496 66,387,623 (241,732) (63,678) 241,732 63,678 - - 45,293,376 34,629,032 39,163,120 31,758,591 84,456,496 66,387,623 as restated (see Note 3) 902,924,707 868,295,675 834,302,063 802,543,472 1,737,226,770 1,670,839,147 Net position, end of year $ 948,218,083 $902,924,707 $873,465,183 $ 834,302,063 $1,821,683,266 $1,737,226,770 Total expenses Increase in net position before transfers Transfers Change in net position Net position, beginning year, 16 TABLE OF CONTENTS Business-type Activities Development-related growth increased Gilbert’s net position for business-type activities in fiscal year 2019 by $39.2 million, including $18.2 million in system development fee collections and $7.7 million in water and wastewater infrastructure contributed by developers. The revenues for business-type activities increased by $13.9 million (11.4%) from the prior year, and expenses increased $6.7 million (7.4%) from the prior year. Financial Analysis of Gilbert’s Funds As noted earlier, Gilbert maintains fund accounting to demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental Funds The focus of the governmental funds is to provide information on near-term inflows, outflows, and balances of resources available for spending. Such information is useful in assessing Gilbert’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Gilbert operated and separately reported the following major governmental funds:        General Streets Special Revenue General Debt Service Special Assessments Debt Service Streets and Traffic Capital Projects Parks Capital Projects Municipal Facilities Capital Projects All nonmajor funds are combined for reporting purposes captioned “Other Governmental Funds”. As of the end of fiscal year 2019, the governmental funds reported ending unrestricted fund balances totaling $114.0 million, an increase of $2.5 million in comparison with the prior fiscal year. See explanations of variances below. General Fund The General Fund is the primary operating fund. At the end of fiscal year 2019, the fund balance of the General Fund was $154.5 million, a decrease of $1.0 million from the prior year mainly due to transfers from the General Fund for various CIP projects and scheduled debt payments. The unrestricted portion of the fund balance was $131.4 million, of which $17.2 million has been assigned for capital replacement, $9.2 million for roads and maintenance, and $12.9 million for future capital projects. As a measure of the General Fund’s liquidity, it is useful to compare its available fund balance to total fund expenditures. The General Fund’s unassigned fund balance represents 57.5% of total General Fund expenditures for the current year. 17 TABLE OF CONTENTS Key elements of General Fund sources and uses are as follows:  Overall, revenues exceeded expenditures in the General Fund by $43.7 million; however, other financing sources and uses (net) were ($44.7) million resulting in a decrease in fund balance of $1.0 million. The transfers out of $47.6 million were for capital projects ($37.7 million), scheduled debt payments ($9.9 million), and subsidy transfers ($103 thousand).  Local sales tax and intergovernmental revenues are the largest revenue sources for the General Fund accounting for 83.1% of the total revenues.  Local sales tax, which accounts for 49.4% of total General Fund revenues, increased $9.2 million (10.2%) from the prior fiscal year due to increased construction and retail sales from new and existing businesses.  Police expenditures increased $5.4 million (10.4%) mainly due to increased contributions made to the PSPRS above the annually required contribution.  Non-departmental expenditures decreased $4.4 million (54.9%) from prior year due to decreased economic development incentive expenditures.  Capital outlay expenditures decreased $17.0 million (79.5%) from the prior year due to the addition of capital project funds that are funded through transfers from other funds. See Note 3. 18 TABLE OF CONTENTS Streets Special Revenue Fund The Streets Fund contains state-shared highway user revenues funds (HURF) that are required by state statute to be used for transportation purposes. Total revenues in the Streets Fund increased $1.3 million (8.5%) from the prior year due to the increase in HURF revenues of $1.1 million. Total expenditures also increased by $794 thousand (6.3%). In total, revenues exceeded expenditures by $3.6 million; however, the transfers out of $754 thousand resulted in a $2.9 million increase in fund balance. Other Major Governmental Funds General Debt Service. The fund balance decreased by $1.7 million during the year. This was primarily due to the use of fund balance to make scheduled debt payments. Special Assessments Debt Service. The fund balance of $74 thousand is restricted to pay future debt service requirements on special assessment bonds. Streets and Traffic Capital Projects. The Streets and Traffic Capital Projects Fund consists of system development fee revenue and the expenditure of those funds to purchase or construct capital assets. The fund balance decreased by $11.1 million during the year. This was due to the use of fund balance to purchase or construct capital assets related to streets and traffic capital projects. Parks Capital Projects. The Parks Capital Projects Fund accounts for system development fee revenue and the expenditure of those funds for parks infrastructure. The fund balance decreased by $13.7 million during the year. This was primarily due to expenditures made during the year to repair, improve, and construct parks related capital assets. The remaining fund balance of $16.7 million will be used to fund future parks needs related to growth in Gilbert. Municipal Facilities Capital Projects. The Municipal Facilities Capital Projects Fund consists of system development fee revenue and Public Facilities Municipal Property bond proceeds and the expenditure of those funds to purchase or construct municipal capital assets. The fund balance increased by $2.0 million during the year. This was due to the increase in police, fire, and general government system development fees collected. Nonmajor Governmental Funds All nonmajor governmental funds are combined into one column on the governmental fund statements. The combined fund balance of these funds decreased $1.4 million (48.0%) to a balance at year-end of $1.5 million. Nonmajor funds represent 0.6% of the total governmental fund balance. Proprietary Funds Gilbert’s proprietary funds statements are prepared on the same basis (accrual) as the government-wide financial statements. Gilbert operates, and separately reports, the following proprietary funds:    Water Wastewater Environmental Services 19 TABLE OF CONTENTS Water Fund The Water Fund is responsible for producing and distributing potable water that exceeds all county, state and federal drinking water standards. The water system is also sized and pressurized to provide adequate fire suppression to the entire planning area and operates two surface water treatment facilities capable of producing 69 million gallons per day (mgd), and 17 ground water wells capable of producing 43.5 mgd. Net position increased by $23.2 million to $459.3 million due primarily to capital contributions of $18.3 million, including $12.6 million in system development fees and $5.7 million in distribution lines contributed by developers. Operating income was $1.9 million, which is consistent with prior year. Wastewater Fund The Wastewater Fund provides wastewater collection and treatment services to residents and businesses in Gilbert through the operation of two wastewater treatment facilities. The services also include the storage and distribution of effluent (treated wastewater). Part of the Phase III Expansion for the Greenfield Water Reclamation Plant (GWRP) includes improvements and upgrades to increase the plant’s capacity from 16 million gallons per day (mgd) to 30 mgd, as well as maintenance and improvements to the existing infrastructure of the plant, which is expected to be completed by the end of fiscal year 2020. Net position increased $14.5 million to $362.9 million due primarily to capital contributions of $7.7 million, including $5.6 million in system development fees and $2.0 million in collection lines contributed by developers. Operating income was $2.1 million, which is an increase of $3.1 million from prior year mainly due to an increase in charges for services from rate increases that went into effect November 2018. Environmental Services Fund Gilbert operates the Environmental Services Fund to provide residential and commercial refuse collection and residential recycling services. Residential services are provided exclusively by Gilbert, while the commercial service competes with the private sector for customers. Net position increased by $907 thousand to $50.1 million, primarily from storm water infrastructure contributed by developers of $575 thousand and investment earnings of $833 thousand. Operating loss was $1.2 million due to expenses exceeding charges for services. The following graph compares the fiscal year revenues to expenses for the Water, Wastewater and Environmental Services Funds. 20 TABLE OF CONTENTS General Fund Budgetary Highlights There was a difference of ($4.9) million between the original adopted budget and the final amended budget. The final amended budget projected that revenues would exceed expenditures by $16.8 million resulting in a $53.4 million reduction to fund balance per the budget. This was mainly due to budgeting $5.9 million less in non-departmental expenditures and $7.1 million less for contingency. During the year, actual revenues exceeded the budgeted amount by $5.5 million (2.8%) mainly due to higher than expected sales taxes collected. Actual expenditures were less than budgeted by $21.5 million (12.1%) mainly due to $5.0 million lower than expected capital outlay expenditures and excess budgeted contingency of $8.8 million. This resulted in an excess of revenues over expenditures of $27.0 million more than budgeted. This also resulted in the actual net change in fund balance being $52.4 million more than budgeted. Capital Asset and Debt Administration Capital Assets. As of June 30, 2019, Gilbert had $1.6 billion in capital assets, which is an increase of $74.2 million (4.8%) over prior year. This was due to major capital assets completed during the fiscal year which included the following: Governmental Activities    Cooper and Guadalupe intersection improvements totaling $15.4 million. Fire station 9 construction of $10.4 million. Developer contributions of street related infrastructure valued at $9.6 million. Business-type Activities    Layton Lakes lift station rehabilitation totaling $7.1 million. Purchase of water rights from the San Carlos Apache Tribe for $31.2 million. Developer contributions of water, wastewater, and storm water infrastructure valued at $8.3 million. The following table presents capital assets balances, net of accumulated depreciation, for the fiscal years ended June 30, 2019 and 2018. Town of Gilbert Capital Assets (net of depreciation) Governmental Activities 2018, as restated 2019 Land Business-type Activities 2019 2019 2018, as restated $ 200,083,163 $ 184,321,561 $ 181,849,320 23,510,621 $ 18,233,843 $ 207,832,182 - - 57,129,947 55,361,334 57,129,947 55,361,334 Construction-in-progress 88,219,026 65,544,603 41,210,231 35,731,221 129,429,257 101,275,824 Buildings 147,695,236 150,535,848 - - 147,695,236 150,535,848 Improvements 24,418,233 24,839,501 - - 24,418,233 24,839,501 Plant, machinery & equip 22,096,986 16,433,140 69,242,746 69,357,016 91,339,732 85,790,156 Depreciable w ater rights - - 38,046,294 6,962,410 38,046,294 6,962,410 539,647,265 546,679,000 370,316,041 360,083,083 909,963,306 906,762,083 Total Capital Assets $ 1,006,398,307 $ 985,881,412 599,455,880 $ 545,728,907 $ 1,605,854,187 $ 1,531,610,319 Nondepreciable w ater rights Infrastructure $ Total 2018, as restated $ 21 TABLE OF CONTENTS Total governmental capital assets increased $20.5 million and business-type capital assets increased $53.7 million. The change in governmental capital assets can be attributed to an increase in construction-in-progress additions of $63.5 million, offset by construction-in-progress deletions of $40.8 million. The majority of the increase for the business-type capital assets can be attributable to infrastructure of $24.8 million and water rights of $33.0 million, offset by depreciation expense of $21.5 million. See Note 7 on pages 61-62 for further information regarding capital assets. Long-term Debt. At June 30, 2019, Gilbert had total bonded debt obligations of $224.6 million related to governmental activities and $140.1 million in business-type activities; $110.4 million of the outstanding debt is general obligation (GO) bonds backed by the full faith and credit of the Town of Gilbert; $4.9 million is special assessment bonds secured by a lien against the land of the benefited property owners in Improvement Districts #19 and #20; and all other outstanding debt is secured by pledges of specific revenue sources. The Arizona Constitution and State Statutes limit a municipality’s bonded debt capacity to certain percentages of its limited property valuation and by the type of project to be constructed with GO bonds. For projects involving water, wastewater, artificial lighting, parks, open space, recreational facility improvements, streets, public safety, and fire and emergency facilities, Gilbert can issue GO bonds up to 20% of its limited property valuation. For any other general-purpose improvements, Gilbert may issue bonds up to 6% of its limited property valuation. Gilbert’s available debt margin at June 30, 2019 was $169.9 million in the 6% capacity and $447.7 million in the 20% capacity. See Note 10 on pages 64-69 for additional information on debt. The following schedule shows Gilbert’s outstanding debt as of June 30, 2019 and 2018. Town of Gilbert Outstanding Debt Governmental Activities 2019 $ 110,445,000 Special Assessment 4,895,000 Street and Highw ay User Revenue Obligations 35,655,000 Municipal Property Corporation 73,560,000 Totals $ 224,555,000 General Obligation Business-type Activities 2018 $ 128,090,000 5,445,000 3,250,000 36,325,000 85,105,000 $ 258,215,000 2019 $ 140,090,000 $ 140,090,000 Total 2018 2019 2018 148,570,000 $ 148,570,000 $ 110,445,000 4,895,000 35,655,000 213,650,000 $ 364,645,000 $ 128,090,000 5,445,000 3,250,000 36,325,000 233,675,000 $ 406,785,000 $ Gilbert’s bonds are rated by leading rating agencies that assess the risk of default based on Gilbert’s financial condition. The following schedule shows Gilbert’s bond ratings as of June 30, 2019. Town of Gilbert Long-term Debt Ratings As of June 30, 2019 General Obligation Public Facilities Municipal Property Corporation Water Resources Municipal Property Corporation Subordinate Lien Pledged Revenue Obligations Improvement Districts 22 Moody's Investor Service Standard and Poors Ratings Group Fitch Ratings Aaa Aa1 Not rated Aa1 Aa1 AAA AAA AAA AAA AA- AAA AAA AAA AAA Not rated TABLE OF CONTENTS Economic Factors and Next Year’s Budget Gilbert, Arizona continues to effectively manage rapid growth and economic expansion while successfully preserving hometown traditions. With an estimated population of about 260,000 residents, Gilbert is Arizona’s Fastest Growing City (WalletHub, 2018). Yet, amid this growth Gilbert is deemed the 3rd Most Livable City in the United States (SmartAsset, 2018) and the 5th Best Place to Find a Job in America (WalletHub, 2018). Gilbert remains the 2nd Safest City in the U.S. according to the 2018 FBI Uniform Crime Report, as well as being ranked the 10th Best Place to Raise a Family in the U.S. (WalletHub, 2018). Additionally, Gilbert Public Schools are considered the 4th Best School District in America (Alarms.org, 2018). Over the past five years, Gilbert has added $3.6 million square feet of office, industrial/flex, and retail space to its inventory, representing an increase of 15.7%. Gilbert’s four employment areas have experienced nearly $930 million in private investment from fiscal years 2013 to 2018. In fiscal year 2019, Gilbert’s economic development initiatives continued to yield positive results for the community. Gilbert’s northwest employment corridor and central business district continue to thrive. In the northwest corridor, three aerospace and aviation related companies choose to expand into Gilbert – Moog Broad Reach Engineering, Aerospace Contacts, and Phoenix Logistics. In the central business district, Rivulon began construction on buildings three and four at the Commons, a 400,000+ square-foot development ideal for technology centers, creative firms, and back office users. This has further strengthened Rivulon’s position as a top destination for corporate office investment, noted by the attraction of the first office investment of Cincinnati Insurance outside of Ohio. In the Heritage District, Gilbert approved a 10-year Redevelopment Plan, completed construction on the new 600+ stall parking garage, saw the opening of Sam Fox’s Culinary Dropout/The Yard, and began construction on a fourstory building. Lastly, the community also welcomed the University of Arizona School of Nursing to the Heritage District, who joins Park University in delivering high quality higher education choices to Gilbert residents. A progressive community demands progressive governance, and Gilbert’s Council and executive leadership stepped up. Gilbert undertakes a zero-based budgeting process for one third of the organization every year, and always applies priority, program, and performance-based approaches. Since 2018, nearly $5 million has been removed due to the zero-based efforts. Directors are tasked with balancing the budget through consensus, rather than presenting requests and waiting to hear back. Only once the directors achieve consensus is the Town Manager presented with the recommended budget. This collaborative approach allows Gilbert to promote transparency, the importance of short- and longterm planning, and maintain a strong return on investment for the zero-based process while staying focused on the citizens and businesses that we all serve in different capacities. In fiscal year 2019, Gilbert proudly unveiled its new mission and “City of the Future” concept. As the largest town in America, Gilbert has successfully created opportunities for growth and a community that the rest of the country has taken notice of as we have received many accolades as described above, however there is more work to be done to prepare Gilbert for the future. Faced with the choice of going the way of cities before us and becoming stagnant in our growth or continuing to innovate, lead and be a city of the future, we choose the latter of the two. Gilbert’s new mission statement is to anticipate change, create solutions and help people. As Gilbert approaches its Centennial in 2020 and the community reflects back on the last 100 years, the new mission statement is focused on the future by keeping Gilbert a sustainable and thriving community today, tomorrow and for many generations to come. The budget for fiscal year 2020 reflects an effort to deliver both effective and efficient services to our community. Even given Gilbert’s growth, the budget is balanced and applies the non-recurring level of construction-related revenues toward non-recurring costs. Recommended increases in ongoing expenses are within the growth in ongoing levels of revenue recognized as a result of growth both in population and in additional retail opportunities within Gilbert. 23 TABLE OF CONTENTS Budget Highlights for Fiscal Year 2020 With carry forwards and contingency adjustments, the proposed budget of $1.1 billion is an increase of about $80 million from fiscal year 2019. It reflects an increase of $55 million in capital improvement projects, $12 million of new personnel and operating requests in the General Fund, $7.5 million of additional PSPRS contributions, increased Streets maintenance in place of debt service (which had a final payment in fiscal year 2019), and other operational increases in the enterprise funds. The budget also includes a capital projects contingency budget of $100 million to allow Council the flexibility and legal authority to respond to community needs. This contingency is consistent with practice in prior years. Balanced Financial Plan: The fiscal year 2020 Budget is balanced based upon identified revenues and expenditures. Constitutional Expenditure Limit: The fiscal year 2020 Budget reflects expenses that will be under the constitutional expenditure limitation. Staff regularly monitors conformity with the constitutional expenditure requirements and will recommend, if necessary, continuing adjustments and modifications necessary to comply with expenditure limitation requirements. State-Shared Revenues: The fiscal year 2020 Budget reflects state-shared revenues based upon Census population adjustments and statutory distribution formulas, taking into account currently projected State sales and income tax collections (provided by the Arizona League of Cities and Towns), which reflect the state’s budgeted HURF distributions. Secondary Property Tax Levy: Council voted to adopt a tax levy of $24.15 million, which maintains the tax rate of $0.99 per $100 of assessed value. Fund Balance: The Revenue Summary lists the use of carry over funds in an amount of about $411 million. This reflects use of revenues which were received in prior fiscal years in excess of minimum fund balance. Capital Project Financing – System Development Fees: The fiscal year 2020 Budget reflects revenues projected from the continued collection of System Development Fees as allowed under current State Law. Financial Contact This financial report is designed to provide a general overview of Gilbert’s finances and to demonstrate accountability for the use of public funds. This report is also available on Gilbert’s website at www.gilbertaz.gov. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to: Town of Gilbert Accounting Manager 50 E Civic Center Drive Gilbert, AZ 85296 (480) 503-6930 24 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Net Position June 30, 2019 Total Component Unit Industrial Development Authority 524,470,536 $ Primary Government Assets Pooled cash and investments Receivables, net: Taxes Special assessments Accrued interest Accounts Due from other governments Prepaid items Inventories Restricted assets: Cash and investments Accrued interest Internal balances Other post-employment benefits Investment in joint venture Capital assets: Non-depreciable Depreciable, net Total assets Governmental Activities Business-type Activities $ $ Deferred outflows of resources Deferred charge on refundings Pensions and other post-employment benefits Total deferred outflows of resources 267,600,215 256,870,321 $ 17,163 14,676,640 4,919,024 1,175,283 12,895,676 3,765,939 6,499 845,043 1,096,662 5,660,516 338,770 51,780 14,676,640 4,919,024 2,271,945 18,556,192 4,104,709 6,499 896,823 - 15,727,402 (1,159,453) 131,838 1,718,277 30,552,867 175,900 1,159,453 49,506 175,191,134 46,280,269 175,900 181,344 176,909,411 - 272,540,587 733,857,720 1,328,700,690 121,850,799 477,605,081 1,070,602,789 394,391,386 1,211,462,801 2,399,303,479 17,163 6,454,838 45,124,284 51,579,122 2,669,881 3,235,094 5,904,975 9,124,719 48,359,378 57,484,097 - Liabilities Accounts payable Accrued liabilities Claims payable Deposits held for others Utility deposits Bond interest payable Unearned revenue Other liabilities: Due within one year Due in more than one year Total liabilities 26,956,331 9,443,056 1,700,000 1,506,501 1,457,166 889,901 12,380,015 822,372 2,069,351 3,103,581 - 39,336,346 10,265,428 1,700,000 1,506,501 2,069,351 4,560,747 889,901 - 39,605,920 338,719,563 420,278,438 8,076,666 173,751,487 200,203,472 47,682,586 512,471,050 620,481,910 - Deferred inflows of resources Pensions and other post-employment benefits Total deferred inflows of resources 11,783,291 11,783,291 2,839,109 2,839,109 14,622,400 14,622,400 - 792,863,888 462,857,212 1,255,721,100 - 67,948,339 2,117,959 9,288,511 426,356 7,032,052 88,083 548,635 67,904,260 948,218,083 30,971,975 379,635,996 873,465,183 98,920,314 2,117,959 9,288,511 426,356 7,032,052 88,083 548,635 447,540,256 $ 1,821,683,266 17,163 17,163 Net position Net investment in capital assets Restricted for: Capital projects Court/police programs Debt service Grant programs Highways and streets Other purposes Special districts Unrestricted Total net position $ The notes to the financial statements are an integral part of this statement. 25 $ $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Activities For the Year Ended June 30, 2019 Functions/Programs Primary government: Governmental activities: General government Management and policy Finance and management services Court Development Services Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental Interest and fiscal charges on long-term debt Total governmental activities Expenses $ 24,948,029 1,883,402 3,897,817 9,448,543 Program Revenues Operating Grants and Contributions Charges for Services $ 28,998 7,145 666,770 8,317,873 $ Capital Grants and Contributions 701,492 32,917 - $ 1,099,749 - 55,328,243 35,263,222 54,632,234 35,840,421 886,089 3,914,638 9,889,904 235,932,542 3,609,443 386,223 15,800 4,355,202 5,000 429,512 17,821,966 320,852 1,855,049 27,025,712 26,585 49,884 30,012,491 4,613,510 2,445,412 16,091,554 10,653,338 642,587 656,489 36,202,639 Business-type activities: Water Wastewater Environmental Services Total business-type activities Total primary government 47,167,081 27,843,727 21,688,906 96,699,714 $ 332,632,256 45,508,286 28,686,043 20,632,800 94,827,129 $ 112,649,095 $ 1,719,627 1,719,627 31,732,118 $ 18,261,278 7,657,534 1,112,893 27,031,705 63,234,344 Component unit: Industrial Development Authority $ $ $ - $ - 125 - General revenues: Sales taxes Property taxes In-Lieu property taxes Franchise taxes Unrestricted state-shared revenue Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of capital assets Miscellaneous Transfers Total general revenues and transfers Change in net position Net position at beginning of year (as restated, see Note 3) Net position at end of year The notes to the financial statements are an integral part of this statement. 26 TABLE OF CONTENTS Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Activities Business-type Activities $ $ (23,117,790) (1,876,257) (3,198,130) (1,130,670) Total - $ (23,117,790) (1,876,257) (3,198,130) (1,130,670) Component Unit Industrial Development Authority $ - (46,784,438) (30,576,538) (11,499,168) (20,805,296) (238,502) (2,778,753) (9,889,904) (151,895,446) - (46,784,438) (30,576,538) (11,499,168) (20,805,296) (238,502) (2,778,753) (9,889,904) (151,895,446) - (151,895,446) 18,322,110 8,499,850 56,787 26,878,747 26,878,747 18,322,110 8,499,850 56,787 26,878,747 (125,016,699) - 98,647,781 25,219,672 1,024,107 2,953,608 53,776,642 3,036,275 10,152,812 1,466,350 1,153,307 (241,732) 197,188,822 45,293,376 902,924,707 $ 948,218,083 11,493,742 183,078 365,821 241,732 12,284,373 39,163,120 834,302,063 $ 873,465,183 98,647,781 25,219,672 1,024,107 2,953,608 53,776,642 3,036,275 21,646,554 1,649,428 1,519,128 209,473,195 84,456,496 1,737,226,770 $ 1,821,683,266 $ (125) $ 4 4 (121) 17,284 17,163 27 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Balance Sheet Governmental Funds June 30, 2019 General Assets Pooled cash and investments Receivables, net: Taxes Special assessments Accrued interest Accounts Due from other governments Due from other funds Prepaid items Advances to other funds Restricted assets: Cash and investments Total assets $ 126,712,257 Streets Special Revenue General Debt Service Special Assessments Debt Service $ $ $ 7,073,244 1,673,785 73,134 14,482,561 587,565 12,009,196 542,097 739,342 6,499 23,054,621 29,262 11 1,491,857 - 174,199 52,366 - 4,919,024 281 - 134,414 178,268,552 8,594,374 15,592,988 17,493,338 4,992,439 Liabilities Accounts payable Accrued liabilities Deposits held for others Due to other funds Interest payable Advances from other funds Unearned revenue Bonds payable Total liabilities 5,395,485 9,143,429 1,506,501 770,390 16,815,805 834,147 178,944 1,013,091 100 1,457,166 11,740,000 13,197,266 - Deferred inflows of resources Unavailable revenue - sales tax Unavailable revenue - special assessments Unavailable revenue - court fines Total deferred inflow of resources 139,119 6,834,914 6,974,033 - - 4,918,044 4,918,044 23,789,838 1,013,091 13,197,266 4,918,044 23,061,120 41,630,634 89,786,960 154,478,714 7,581,283 7,581,283 4,296,072 4,296,072 74,395 74,395 Total liabilities and deferred inflows of resources Fund balances (deficits) Nonspendable Restricted Assigned Unassigned Total fund balances (deficits) Total liabilities, deferred inflows of resources, and fund balances (deficits) $ 178,268,552 The notes to the financial statements are an integral part of this statement. 28 $ 8,594,374 $ 17,493,338 $ 4,992,439 TABLE OF CONTENTS Streets and Traffic Capital Projects Parks Capital Projects $ $ $ 81,400,011 Municipal Facilities Capital Projects 33,267,608 $ 4,215,814 Other Governmental Funds Total Governmental Funds $ 4,379,546 $ 258,795,399 320,457 - 119,834 - 23,667 - 19,880 6,241 6,903 1,731,985 - 14,676,640 4,919,024 1,139,673 12,016,110 3,765,939 739,342 6,499 23,054,621 81,720,468 33,387,442 4,239,481 6,144,555 15,727,402 334,840,649 6,722,547 6,722,547 9,242,760 7,446,558 16,689,318 730,627 15,608,063 16,338,690 3,750,202 37,505 739,342 119,511 4,646,560 26,675,868 9,359,878 1,506,501 739,342 1,457,166 23,054,621 889,901 11,740,000 75,423,277 - - - - 139,119 4,918,044 6,834,914 11,892,077 6,722,547 16,689,318 16,338,690 4,646,560 87,315,354 74,997,921 74,997,921 16,698,124 16,698,124 3,536,522 (15,635,731) (12,099,209) 3,285,767 (1,787,772) 1,497,995 23,061,120 110,470,084 41,630,634 72,363,457 247,525,295 6,144,555 $ 334,840,649 81,720,468 $ 33,387,442 $ 4,239,481 $ 29 30 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Reconciliation of Balance Sheet To the Statement of Net Position June 30, 2019 Fund balances of governmental funds $ 247,525,295 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. 1,798,871,108 (792,532,586) Governmental capital assets Accumulated depreciation 1,006,338,522 The investment in joint venture is not a financial resource and, therefore, is not reported in the funds. 1,718,277 Some receivables are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the governmental funds. 11,892,077 Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance, to the individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position, but are not included on the governmental funds balance sheet. 5,182,126 Deferred outflows and inflows of resources related to pensions, other post-employment benefits (OPEB), and deferred charges on debt refundings are applicable to future reporting periods and, therefore, are not reported in the funds. Unamortized deferred outflow on bond refunding Pension and other post-employment benefits-related items 6,454,838 33,293,563 39,748,401 (212,815,000) (22,526,112) (15,135,580) (598,923) (113,111,000) (364,186,615) Certain liabilities applicable to the Town's governmental activities are not due and payable in the current period, and accordingly are not reported as fund liabilities in the governmental funds balance sheet. Bonds payable Bonds premium Compensated absences Net other post-employment benefits Net pension Net position of governmental activities - statement of net position The notes to the financial statements are an integral part of this statement. 31 $ 948,218,083 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2019 General Revenues Taxes: Sales Property Franchise Special assessments Licenses and permits Intergovernmental Charges for services Fines and forfeitures Other entities' participation System development fees Gifts and donations Investment earnings Miscellaneous Total revenues Expenditures Current: General government: Management and policy Finance and management services Court Development services Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service: Principal Interest Fiscal and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures $ 98,671,251 2,953,608 5,735,377 67,369,888 11,944,519 2,878,017 4,379,761 68,186 4,893,711 900,919 199,795,237 Streets Special Revenue $ 16,559,126 420 11,760 200,351 232,068 17,003,725 General Debt Service Special Assessments Debt Service $ $ 22,295,654 414,532 22,710,186 818,092 3,620 3,444 825,156 22,355,663 2,396,077 3,358,647 7,700,715 - - - 57,042,697 35,745,743 671,816 18,827,056 3,573,853 13,274,332 - - - 4,380,924 156,053,191 43,742,046 124,548 13,398,880 3,604,845 33,640,000 10,978,031 22,551 44,640,582 (21,930,396) 550,000 264,095 12,125 826,220 (1,064) Other financing sources (uses) Proceeds from the sale of capital assets Transfers in Transfers out Total other financing sources (uses) 1,691,366 1,190,910 (47,626,264) (44,743,988) (754,300) (754,300) 20,205,988 20,205,988 - Net change in fund balances (1,001,942) 2,850,545 (1,724,408) (1,064) Fund balances at beginning of year (as restated, see Note 3) Fund balances at end of year 155,480,656 $ 154,478,714 The notes to the financial statements are an integral part of this statement. 32 $ 4,730,738 7,581,283 $ 6,020,480 4,296,072 $ 75,459 74,395 TABLE OF CONTENTS Streets and Traffic Capital Projects Parks Capital Projects $ $ $ 574,383 2,239,233 3,002,677 20,488 5,836,781 Municipal Facilities Capital Projects 9,632,004 1,100,228 10,732,232 $ 10,095,197 191,825 10,287,022 Other Governmental Funds Total Governmental Funds $ $ 2,924,018 1,976,638 867,884 415,564 114,655 83,170 6,381,929 98,671,251 25,219,672 2,953,608 818,092 5,735,377 86,480,035 12,816,443 3,305,341 4,379,761 21,966,434 182,841 9,889,938 1,153,475 273,572,268 - - - 586,553 393,843 - 22,942,216 2,396,077 3,752,490 7,700,715 905 10,644,615 7,215 259,105 282,781 1,025,690 82,658 1,823,259 1,009,996 887,577 49,884 58,327,492 35,828,401 15,769,407 30,481,667 887,577 3,914,638 20,077,548 20,078,453 (14,241,672) 20,936,944 31,588,774 (20,856,542) 9,667,150 10,209,036 77,986 16,456,950 22,316,410 (15,934,481) 34,190,000 11,242,126 34,676 71,644,064 299,111,546 (25,539,278) 6,848,246 (3,708,651) 3,139,595 12,080,828 (4,941,482) 7,139,346 7,740,960 (5,826,574) 1,914,386 15,018,826 (466,853) 14,551,973 1,691,366 63,085,758 (63,324,124) 1,453,000 (11,102,077) (13,717,196) 1,992,372 (1,382,508) (24,086,278) 2,880,503 1,497,995 271,611,573 $ 247,525,295 86,099,998 74,997,921 $ 30,415,320 16,698,124 $ (14,091,581) (12,099,209) $ 33 34 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities For the Year Ended June 30, 2019 Net change in fund balances - total governmental funds $ (24,086,278) Amounts reported for governmental activities in the statement of net position are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. 71,644,064 (55,175,480) Capital outlay Depreciation expense 16,468,584 The net effect of various miscellaneous transactions involving capital assets (i.e., sales and donations) is to decrease net position. (5,193,864) Repayment of bond principal is reported as expenditures in governmental funds and thus has the effect of reducing fund balance because current financial resources have been used. For the government-wide statements, however, the principal payments reduce the long-term liabilities in the statement of net position and do not result in an expense in the statement of activities. Also, governmental funds report the effect of deferred outflows and resources, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. 34,190,000 1,386,897 Principal payments Amortization expense 35,576,897 Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance, to the individual funds. The adjustments for internal service funds "close" those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds' costs for the year. 2,379,320 Capital assets contributed by developers and other entities are not shown on the governmental fund statements but are included in the assets of the Town. On the statement of activities, these donations are shown as capital contributions. 10,777,728 Compensated absence expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. 2,104,226 Pension/OPEB contributions are reported as expenditures in the governmental funds when made. However, they are reported as deferred outflows of resources in the statement of net position because the reported net pension/OPEB liability is measured a year before the report date. Pension/OPEB expense, which is the change in the net pension/OPEB liability adjusted for changes in deferred outflows and inflows of resources related to pensions/OPEB, is reported in the statement of activities. Pension/OPEB contributions Pension/OPEB expense 23,359,471 (15,576,438) 7,783,033 (552,736) 59,936 (23,470) (516,270) Certain revenues are not reported in the governmental funds because they do not provide current financial resources due to unavailability but are recognized as revenue in the statement of activities. However, other revenues in the governmental funds that provide current financial resources are not included in the statement of activities because they were recognized in a prior period. Special assessments Court fines Sales tax $ Change in net position of governmental activities - statement of activities The notes to the financial statements are an integral part of this statement. 35 45,293,376 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues Taxes: Sales Franchise Licenses and permits Intergovernmental Charges for services Fines and forfeitures Other entities' participation Gifts and donations Investment earnings Miscellaneous Total revenues $ 92,000,000 2,825,000 4,355,000 66,325,000 11,367,300 3,515,000 12,387,690 918,000 410,000 241,000 194,343,990 Final $ 92,000,000 2,825,000 4,355,000 66,325,000 11,367,300 3,515,000 12,387,690 918,000 410,000 241,000 194,343,990 Actual $ 98,671,251 2,953,608 5,735,377 67,369,888 11,944,519 2,878,017 4,379,761 68,186 4,893,711 900,919 199,795,237 Variance with Final Budget Positive (Negative) $ 6,671,251 128,608 1,380,377 1,044,888 577,219 (636,983) (8,007,929) (849,814) 4,483,711 659,919 5,451,247 Expenditures Current: General government: Management and policy Finance and management services Court Development Services Public safety: Police Fire Highways and streets Parks and recreation Non departmental Capital outlay Contingency Total expenditures 23,471,720 2,635,420 3,401,380 7,999,720 24,363,250 2,587,030 3,421,380 8,292,777 22,355,663 2,396,077 3,358,647 7,700,715 2,007,587 190,953 62,733 592,062 55,884,800 34,077,250 571,050 18,102,460 11,789,540 8,689,690 15,900,000 182,523,030 58,009,470 36,338,815 761,300 19,812,620 5,872,610 9,333,824 8,789,722 177,582,798 57,042,697 35,745,743 671,816 18,827,056 3,573,853 4,380,924 156,053,191 966,773 593,072 89,484 985,564 2,298,757 4,952,900 8,789,722 21,529,607 Excess of revenues over expenditures 11,820,960 16,761,192 43,742,046 26,980,854 Other financing sources (uses) Proceeds from the sale of capital assets Transfers in Transfers out Total other financing sources (uses) 6,289,890 1,334,300 (77,431,890) (69,807,700) 6,289,890 1,339,340 (77,757,850) (70,128,620) 1,691,366 1,190,910 (47,626,264) (44,743,988) (4,598,524) (148,430) 30,131,586 25,384,632 $ (57,986,740) $ (53,367,428) (1,001,942) 155,480,656 $ 154,478,714 $ 52,365,486 Net change in fund balances Fund balances at beginning of year (as restated, see Note 3) Fund balances at end of year The notes to the financial statements are an integral part of this statement. 36 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Streets Special Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues Intergovernmental Charges for services Fines and forfeitures Investment earnings Miscellaneous Total revenues $ Expenditures Current: Highways and streets Capital outlay Contingency Total expenditures 14,900,000 100,000 1,000 15,001,000 Final $ 14,900,000 100,000 1,000 15,001,000 Actual $ 16,559,126 420 11,760 200,351 232,068 17,003,725 Variance with Final Budget Positive (Negative) $ 1,659,126 420 11,760 100,351 231,068 2,002,725 13,433,570 136,000 523,650 14,093,220 13,524,490 136,000 432,730 14,093,220 13,274,332 124,548 13,398,880 250,158 11,452 432,730 694,340 Excess of revenues over expenditures 907,780 907,780 3,604,845 2,697,065 Other financing uses Transfers out Total other financing uses (754,300) (754,300) (754,300) (754,300) (754,300) (754,300) - 153,480 2,850,545 4,730,738 7,581,283 $ Net change in fund balances Fund balances at beginning of year Fund balances at end of year 153,480 $ $ The notes to the financial statements are an integral part of this statement. 37 $ 2,697,065 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Net Position Proprietary Funds June 30, 2019 Water Assets Current assets: Pooled cash and investments Restricted cash and investments Receivables (net): Accrued interest Accounts Restricted accrued interest Due from other governments Inventories Total current assets Business-type Activities - Enterprise Funds Environmental Total Enterprise Wastewater Services Funds $ 114,793,547 27,768,536 $ 119,858,548 2,784,331 546,952 3,186,320 123,216 313,878 51,780 146,784,229 455,291 1,447,766 52,684 19,492 124,618,112 94,419 1,026,430 5,400 23,344,475 1,096,662 5,660,516 175,900 338,770 51,780 294,746,816 89,551,861 25,156 85,639,273 8,128 16,222 175,191,134 49,506 87,887,958 274,591,156 452,056,131 598,840,360 33,874,810 167,224,525 286,746,736 411,364,848 88,031 35,789,400 35,893,653 59,238,128 121,850,799 477,605,081 774,696,520 1,069,443,336 Deferred outflows of resources Pensions and other post-employment benefits Deferred charge on refundings Total deferred outflows of resources 1,637,810 2,669,881 4,307,691 530,878 530,878 1,066,406 1,066,406 3,235,094 2,669,881 5,904,975 Liabilities Current liabilities: Accounts payable Accrued liabilities Current portion of accrued compensated absences Claims payable Bond interest payable Bonds payable Utility deposits Total current liabilities 4,662,942 409,954 400,077 2,262,406 5,285,000 2,043,876 15,064,255 5,672,283 139,695 181,552 841,175 1,940,000 8,774,705 2,044,790 272,723 270,037 25,475 2,613,025 12,380,015 822,372 851,666 3,103,581 7,225,000 2,069,351 26,451,985 Noncurrent liabilities: Utility revenue bonds payable Long term portion of compensated absences Other post-employment benefits Net pension liability Total noncurrent liabilities Total liabilities 117,044,579 718,051 76,298 9,534,793 127,373,721 142,437,976 36,232,902 391,171 25,365 3,080,712 39,730,150 48,504,855 445,357 53,491 6,148,768 6,647,616 9,260,641 153,277,481 1,554,579 155,154 18,764,273 173,751,487 200,203,472 Deferred inflows of resources Pensions and other post-employment benefits Total deferred inflows of resources 1,428,471 1,428,471 465,516 465,516 945,122 945,122 2,839,109 2,839,109 259,768,084 6,702,330 192,811,190 $ 459,281,604 167,211,697 24,269,645 171,444,013 $ 362,925,355 35,877,431 14,221,340 50,098,771 462,857,212 30,971,975 378,476,543 872,305,730 Noncurrent assets: Investment in joint venture Other post employment benefits Capital assets: Non-depreciable Depreciable, net Total noncurrent assets Total assets Net position Net investment in capital assets Restricted for capital projects Unrestricted Total net position $ $ 22,218,226 - Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net position of business-type activities The notes to the financial statements are an integral part of this statement. 38 $ $ 256,870,321 30,552,867 1,159,453 873,465,183 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 8,804,816 35,610 879,566 845,043 10,565,035 5,395 59,785 65,180 10,630,215 349,384 349,384 280,463 83,178 78,584 1,700,000 2,142,225 133,276 15,572 2,044,993 2,193,841 4,336,066 301,954 301,954 $ 59,785 6,281,794 6,341,579 39 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2019 Business-type Activities - Enterprise Funds Operating revenues Charges for services Other Total operating revenues $ Water Wastewater Environmental Services 45,508,286 260,277 45,768,563 $ $ 28,686,043 11,205 28,697,248 20,632,800 94,339 20,727,139 Total Enterprise Funds $ 94,827,129 365,821 95,192,950 Operating expenses General and administrative Personnel services Operation and maintenance Claims incurred Depreciation Allocation of indirect expenses Total operating expenses 1,387,515 8,481,447 16,937,248 14,958,540 2,079,340 43,844,090 768,218 3,410,014 10,611,568 10,787,106 1,011,350 26,588,256 1,368,992 7,315,562 7,907,920 4,305,949 1,004,610 21,903,033 3,524,725 19,207,023 35,456,736 30,051,595 4,095,300 92,335,379 Operating income (loss) 1,924,473 2,108,992 (1,175,894) 2,857,571 Nonoperating revenues (expenses) Intergovernmental Interest expense Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) 1,719,627 (3,558,897) 5,664,806 30,657 3,856,193 (1,337,525) 4,995,765 12,025 3,670,265 537,673 833,171 140,396 1,511,240 2,257,300 (4,896,422) 11,493,742 183,078 9,037,698 Income before contributions and transfers 5,780,666 5,779,257 335,346 11,895,269 Capital contributions Transfers in Transfers out 18,261,278 484,207 (1,276,830) 7,657,534 1,199,293 (161,222) 575,220 (3,716) 26,494,032 1,683,500 (1,441,768) Change in net position 23,249,321 14,474,862 906,850 38,631,033 Total net position at beginning of year (as restated, see Note 3) 436,032,283 348,450,493 49,191,921 $ 459,281,604 $ 362,925,355 Total net position at end of year $ 50,098,771 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Changes in net position of business-type activities The notes to the financial statements are an integral part of this statement. 40 $ 532,087 39,163,120 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 25,905,034 784,769 26,689,803 1,613,710 2,092,826 5,037,392 15,279,349 14,626 24,037,903 2,651,900 262,872 262,872 2,914,772 (3,366) 2,911,406 3,430,173 $ 6,341,579 41 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2019 Business-type Activities - Enterprise Funds Cash flows from operating activities Cash receipts from customers Other operating cash receipts Cash receipts from other funds for services Cash receipts (payments) from deposits Cash payments to suppliers for goods and services Cash payments to employees for services Cash payments to other funds for services Net cash provided by operating activities $ Water Wastewater Environmental Services 45,611,967 260,277 (698,029) (19,472,616) (9,108,366) (2,079,340) 14,513,893 $ $ 28,648,877 11,205 (12,639,253) (4,013,552) (1,011,350) 10,995,927 20,532,273 94,339 7,300 (8,319,144) (7,404,748) (1,004,610) 3,905,410 Total Enterprise Funds $ 94,793,117 365,821 (690,729) (40,431,013) (20,526,666) (4,095,300) 29,415,230 Cash flows from noncapital financing activities Transfers from other funds Transfers to other funds Net cash provided (used) by noncapital financing activities 484,207 (1,276,830) (792,623) 1,199,293 (161,222) 1,038,071 (3,716) (3,716) 1,683,500 (1,441,768) 241,732 Cash flows from capital and related financing activities Acquisition and construction of capital assets Proceeds from development fees Cash paid for interest and fiscal charges Principal payments on bonds Proceeds from intergovernmental agreements Proceeds from sale of capital assets Net cash used by capital and related financing activities (45,493,739) 12,552,947 (4,652,688) (5,055,000) 2,728,433 30,657 (39,889,390) (37,365,015) 5,647,165 (1,034,561) (3,425,000) 12,025 (36,165,386) (4,265,025) 532,273 140,396 (3,592,356) (87,123,779) 18,200,112 (5,687,249) (8,480,000) 3,260,706 183,078 (79,647,132) 5,528,487 5,528,487 4,860,526 4,860,526 826,610 826,610 11,215,623 11,215,623 (20,639,633) 163,201,716 $ 142,562,083 (19,270,862) 141,913,741 $ 122,642,879 $ 1,135,948 21,082,278 22,218,226 (38,774,547) 326,197,735 $ 287,423,188 $ $ $ (1,175,894) $ Cash flows from investing activities Interest received on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Changes in assets and liabilities: Accounts receivable Inventories Deferred outflows of resources Accounts payable Claims payable Deposits Accrued expenses Other post-employment benefits Net pension liability Deferred inflows of resources Net cash provided by operating activities Supplemental disclosure of noncash financing activities: Additions to property and equipment: Contributions from developers Total additions to property and equipment 1,924,473 2,108,992 2,857,571 14,958,540 10,787,106 4,305,949 30,051,595 $ 103,681 6,718 (203,677) (1,154,570) (698,029) (164,899) (92,949) (903,062) 737,667 14,513,893 $ (37,165) (57,945) (1,259,467) 20,339 (30,660) (772,960) 237,687 10,995,927 $ (100,527) (133,223) 957,768 7,300 9,035 (71,003) (388,743) 494,748 3,905,410 $ (34,011) 6,718 (394,845) (1,456,269) (690,729) (135,525) (194,612) (2,064,765) 1,470,102 29,415,230 $ 5,708,331 5,708,331 $ 2,010,369 2,010,369 $ 575,220 575,220 $ 8,293,920 8,293,920 The notes to the financial statements are an integral part of this statement. 42 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 475,992 784,769 24,631,101 (21,975,170) (2,067,940) 1,848,752 (3,366) (3,366) - 249,102 249,102 $ 2,094,488 6,710,328 8,804,816 $ 2,651,900 14,626 $ (797,941) (153,892) (88,335) (76,827) 186,000 (1,311) (18,641) (42,881) 176,054 1,848,752 $ - 43 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Fiduciary Net Position Fiduciary Funds June 30, 2019 Firemen's Pension Trust Agency Funds $ $ Assets Restricted cash and investments Prepaid items Total assets 85,979 - 19,934 16,633 85,979 36,567 - 36,567 Liabilities Dependent care benefits payable Total liabilities - Net Position Restricted for pensions $ The notes to the financial statements are an integral part of this statement. 44 85,979 $ 36,567 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Changes in Fiduciary Net Position Fiduciary Fund For the Year Ended June 30, 2019 Firemen's Pension Trust Additions Investment earnings $ Total additions 1,923 1,923 Deductions Benefits Administration 2,400 100 Total deductions 2,500 Change in net position (577) 86,556 Net Position - beginning of the year Net Position - end of the year $ The notes to the financial statements are an integral part of this statement. 45 85,979 46 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 The Town of Gilbert, Arizona (Gilbert) was incorporated on July 6, 1920, under the provisions of Article 13, Section 1 of the Constitution of the State of Arizona. Gilbert operates as a general law community, under the provisions of Title 9, Chapter 2, Article 3 (Common Council provision). Gilbert operates under the Council-Manager form of government, as empowered in Chapter 2, Article 2-51 of the Code of the Town of Gilbert, Arizona. There are seven members of the Council, elected to staggered four-year terms. The voters select the Mayor and the Council membership annually elects the Vice Mayor. Note 1 - Summary of Significant Accounting Policies Gilbert’s accounting policies conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. A. Reporting Entity Gilbert’s operations include public safety (police, fire, and animal control), parks and recreation (parks, recreation, library, culture and arts, and social services), development services (planning, code enforcement, and engineering), and general administration in support of operations. Gilbert also operates three enterprise funds to provide water, wastewater, and environmental services, and two internal service funds that provide equipment and fleet maintenance and employee self-insurance for medical and dental claims. The accompanying financial statements present the activities of Gilbert (the primary government) and its component units. Component units are legally separate entities for which Gilbert is considered to be financially accountable. Blended component units, although legally separate entities, are in substance part of Gilbert’s operations. Therefore, data from these units is combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the combined financial statements to emphasize they are legally separate from the Town of Gilbert. Each blended and discretely presented component unit discussed below has a June 30 year-end. Blended Component Units - The Water Resources Municipal Property Corporation (Water MPC) is a legally separate, non-profit corporation which exists solely for the purpose of financing the construction or acquisition of water and wastewater capital improvement projects. The Public Facilities Municipal Property Corporation (Public Facilities MPC) is a legally separate, non-profit corporation which exists solely for the purpose of financing construction of municipal facilities. Each is considered a blended component unit because the Council appoints the five-member board of directors of each MPC, the Council must approve any amendments to the articles of incorporation of each MPC, the Council must approve any debt issues of each MPC, and each MPC provides services solely to the Town of Gilbert. At June 30, 2019, the Water MPC bonded debt is reported within the Water and Wastewater Funds and the Public Facilities MPC bonded debt is reported within the General Debt Service Fund (current portion only) and within the governmental activities in the government-wide statement of net position. Discretely Presented Component Unit - The Industrial Development Authority (IDA) issues industrial revenue bonds to provide financial assistance to private sector entities for the acquisition and construction of eligible industrial and commercial facilities deemed to be in the public interest. The IDA is considered a component unit because the Council appoints the board of directors of the IDA, the Council must approve any amendments to the articles of incorporation of the IDA, and the Council must approve any debt issues of the IDA. The IDA is discretely presented in these combined financial statements because the IDA does not provide services solely to Gilbert. Separate financial statements for the IDA have not been prepared. 47 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 B. Jointly Governed Organizations Phoenix-Mesa Gateway Airport Authority (PMGAA) is a non-profit corporation established and funded by the Towns of Gilbert and Queen Creek, the Cities of Mesa and Phoenix, and the Gila River Indian Community. The purpose of the entity is the redevelopment of Williams Air Force Base, which was closed in September 1993 and became Phoenix-Mesa Gateway Airport. The airport has three runways, a passenger terminal and is positioned to be a reliever airport to Phoenix’s Sky Harbor International Airport. The Board of Directors consists of the mayors of the respective communities and the governor of the tribal community. Gilbert contributed $350,000 in fiscal year 2019 to the PMGAA operating and capital budget. Regional Public Transportation Authority (RPTA) is a voluntary association of local governments, including Maricopa County, Mesa, Tempe, Scottsdale, Glendale, Phoenix, and Gilbert. Its purpose is to create a regional public transportation plan for Maricopa County. The Board of Directors consists of the mayors of those municipalities and a member of the County Board of Supervisors. C. Government-wide and Fund Financial Statements The government-wide financial statements (Statement of Net Position and Statement of Activities) report on Gilbert and its component units as a whole, excluding fiduciary activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The government-wide Statement of Net Position reports all financial and capital resources of the government (excluding fiduciary funds). It is displayed in a format of assets and deferred outflows of resources, less liabilities and deferred inflows of resources equals net position, with the assets and liabilities shown in order of their relative liquidity. Net position is required to be displayed in three components: 1) net investment in capital assets, 2) restricted and 3) unrestricted. Net investment in capital assets is capital assets net of accumulated depreciation, reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted net position has constraints placed on its use by either: 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. All net position not otherwise classified as restricted, is shown as unrestricted. The government-wide Statement of Activities demonstrates the degree to which the direct expenses of the various functions or departments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or department. Interest and fiscal charges on long-term debt are not allocated to the various functions. Program revenues include charges for services, fines and forfeitures, licenses and permit fees, special assessment fees, system development fees, intergovernmental grants and other entities participation. Taxes, investment earnings, and other revenues not identifiable with a particular function or department are included as general revenues. The general revenues support the net costs of the functions and departments not covered by program revenues. For the most part, the effect of internal activity has been removed from the government-wide financial statements. Net internal activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. However, certain charges between the enterprise funds’ utility systems and the various functional activities are not eliminated in the government-wide statements, as this would distort the direct costs and program revenues reported for the various functions concerned. 48 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Separate financial statements are provided for the governmental funds, proprietary funds and fiduciary funds. The focus of the fund financial statements is on major funds. Major individual governmental funds and proprietary funds are reported as separate columns in the fund financial statements. Other nonmajor governmental funds, as well as the internal service funds, are summarized into a single column on the fund financial statements and are detailed in the combining statements included as supplementary information. As stated above, the fiduciary funds are presented in the fund financial statements and not included in the government-wide statements. By definition these assets are being held for the benefit of a third party and cannot be used to address Gilbert’s activities or obligations. The internal service funds, which provide services to the other funds of the government, are presented in a single combined column in the proprietary fund financial statements. Because the principal users of the internal service funds are the governmental activities, the assets and liabilities of the internal service funds are consolidated into the governmental activities column of the government-wide Statement of Net Position. The costs of the internal service fund services are spread to the appropriate function or department on the government-wide Statement of Activities and the revenues and expenses within the internal service funds are eliminated from the government-wide financial statements to avoid any doubling up effect from these revenues and expenses. D. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Agency fund financial statements have no measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, revenues are considered available if they are collected within 60 days of the end of the current fiscal period. Principal revenue sources considered to be susceptible to accrual are property taxes, sales taxes, franchise taxes, licenses and permits, intergovernmental revenue and investment earnings associated with the current fiscal period. Charges for services, fines and forfeitures, and miscellaneous revenues are recorded as revenue when received as cash because they are generally not measurable until actually received. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. Since the governmental fund financial statements are presented on a different measurement focus and basis of accounting than the government-wide statements’ governmental activities column, a reconciliation is presented on the page following each fund statement. These reconciliations briefly explain the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide presentation. The proprietary funds and the Pension Trust Fund are reported using the economic resources measurement focus and the accrual basis of accounting (same basis as the government-wide financial statements). 49 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenue of Gilbert’s internal service funds are charges to user departments for services provided. The principal operating revenue of Gilbert’s enterprise funds are user fees and charges to customers for water, wastewater, and environmental services. Operating expenses for these funds include the cost of supplies and repair and maintenance, administrative and payroll expenses, and depreciation. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. E. Fund Accounting Gilbert uses funds to report its financial position and the results of its operations. Fund accounting segregates funds according to their intended purpose and is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts, which includes assets, liabilities, fund equity, revenues and expenditures/expenses. Gilbert uses the following fund categories, further divided by fund type: Governmental Funds Governmental funds are those through which most of the governmental functions are financed. The measurement focus is based upon determination of changes in financial position rather than upon net income determination. Gilbert reports the following major governmental funds: General - The General Fund is the primary operating fund and is used to account for all financial resources except those required to be accounted for in another fund. The General Fund will always be considered a major fund in the basic financial statements. Streets Special Revenue – The Streets Special Revenue Fund accounts for Gilbert’s portion of the Arizona Highway User Revenue Tax (HURF). The revenue is used exclusively for the maintenance and improvement of highways and streets. General Debt Service – The General Debt Service Fund accounts for the principal and interest requirements of general obligation, municipal property corporation revenue bonds, and revenue obligations not recorded in proprietary funds. Financing is provided from the levy of secondary property taxes and revenue-supported transfers. Special Assessments Debt Service – The Special Assessments Fund accounts for the principal and interest requirements of special assessment bonds not recorded in proprietary funds. Financing is provided by special assessment levies against benefited property owners. Streets and Traffic Capital Projects – The Streets and Traffic Capital Projects Fund accounts for the receipt of proceeds restricted or assigned for expenditure on street and traffic capital improvements. Proceeds recorded in this fund include general obligation bonds for street projects, roads and maintenance and traffic system development fees collected from building permits, state funds in accordance with the MAG Regional Transportation Plan approved by voters as Proposition 400 in 2004, and other outside sources such as developers or other governments. Parks Capital Projects – The Parks Capital Projects Fund accounts for the receipt of parks system development fees collected from building permits paid and the expenditure of those funds for parks capital improvements. 50 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Municipal Facilities Capital Projects – The Municipal Facilities Capital Projects Fund accounts for the receipt of proceeds restricted for expenditure on municipal facilities capital improvements. Proceeds recorded in this fund include general obligation bonds for municipal projects and police, fire, and general government system development fees previously collected from building permits. Proprietary Funds Proprietary funds are used to account for Gilbert's ongoing activities which are similar to those found in the private sector, where cost-recovery and the determination of net income is useful or necessary for sound fiscal management. The measurement focus is based upon determination of net income, changes in net position, financial position and cash flows. Gilbert reports the following major proprietary funds: Water – The Water Fund accounts for the revenues and expenses from the operation and maintenance of the domestic water system. Wastewater – The Wastewater Fund accounts for the revenues and expenses from the operation of the sanitary wastewater collection and treatment and reclaimed water distribution system. Environmental Services – The Environmental Services Fund accounts for the revenues and expenses of operating the solid waste collection system and environmental compliance. Additionally, Gilbert reports the following fund types: Internal Service – The Internal Service Funds account for operations that provide services to other departments on a cost-reimbursement basis. These services include maintenance of Gilbert’s motorized equipment and self-insurance for employee benefit programs. Pension Trust - The Pension Trust Fund accounts for assets held by the government in a trustee capacity. The fund includes the assets and pension payments to retired volunteer firefighters and survivors. Agency – The Agency Funds are used to account for assets held by the government as an agent for individuals, private organizations, other governments and/or other funds. Gilbert currently maintains agency funds to account for monies collected from employees to pay medical and dependent care claims and monies collected from sworn fire employees for providing a monthly stipend for retirees to apply to the cost of their medical and/or dental insurance, medical and dental co-pays, and prescriptions and other benefits. F. Budgetary Data In December of each year, the Office of Management & Budget (OMB) prepares a revenue estimate based upon local and state-shared revenue forecasts, historic trends, economic indicators, anticipated growth, and year-to-date revenue performance to develop guidelines for departments to follow in prioritizing budget requests. Simultaneously, departments develop operating budget requests and submit them to the OMB. Departments work with the Capital Improvement Program (CIP) Division to finalize project estimates for the CIP and submit them to the OMB for funding. Estimates for trust and agency, debt service, maintenance improvement districts, and internal service funds are prepared by respective departments and submitted to the OMB for review. 51 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 In April, the Council is presented with a working budget request for preliminary review and discussion and approves a schedule of hearings and dates for adoption of the budget. A public hearing is held in May for discussion and adoption of the preliminary budget. The preliminary budget sets the maximum legal expenditure limit for the upcoming year. A second public hearing is held in June for discussion and adoption of the final budget. The Council typically adopts the final tax levy in June and reports the levy amounts to Maricopa County for collection not later than the third Monday in August. The Council sets policy and adopts the annual budget at the fund level as a total amount of expenditures. Financial control is set by Council at the fund level, with budgetary control for operating performance administered at the departmental level. Budget adjustments for special revenue funds, excluding the Streets Special Revenue Fund, will be administered by the OMB and will not exceed the available revenues. Grants and restricted appropriations are administered by departments. Directors may authorize transfers within nonpersonnel budget lines at the same fund, department, and project level. Council action is required to approve adjustments between funds, projects, or contingency transactions over $50,000. All annual appropriations lapse at year-end and are considered for inclusion in the subsequent year’s budget on a case-by-case basis. Gilbert prepares its budget on a basis generally consistent with GAAP, with certain exceptions as explained in Note 2. In addition, the financial statements present the budget and actual information for the departments at a summary level by function. G. Pooled Cash and Investments Gilbert maintains pooled cash and investment accounts for funds that are not legally required to be maintained separately. Each fund's equity in pooled cash and investments represents that fund's position in the consolidated accounts and determines that fund's allocation of interest earned in the pool. The Arizona Revised Statutes require a pooled collateral program for public deposits and regulate the investment of surplus cash. Gilbert limits its investments to the Local Government Investment Pool (managed by the Arizona State Treasurer), U.S. government securities, certificates of deposit, bonds, repurchase agreements, corporate notes, commercial paper, and money market accounts. Investments are stated at fair value based on quoted market prices. H. Inventories and Prepaid Items Inventories are recorded in the Equipment Maintenance Internal Service Fund and the Water Enterprise Fund. Inventories are recorded as assets when purchased and expensed when consumed. These inventories are stated at cost using the weighted average method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Prepaid items are recorded as expenses when consumed in the government-wide financial statements and fund financial statements. I. Restricted Assets Certain bond proceeds, as well as certain resources set aside for their repayment, are classified as restricted on the Balance Sheet, or Statement of Net Position, because they are maintained separately and their use is limited by applicable debt covenants. 52 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 J. Capital Assets Capital assets, including public domain infrastructure (e.g., roads, bridges, sidewalks and similar assets), are defined as assets with an initial, individual cost of more than $10,000 and an estimated useful life greater than one year. All infrastructure, including infrastructure acquired prior to June 30, 1980, is reported. Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Donated capital assets (including streets, water and wastewater lines installed by developers) are recorded at acquisition value. Gain or loss is recognized when assets are retired from service or otherwise disposed. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed, if appropriate. Capital assets are depreciated using the straight-line method based on the following estimated useful lives (land, certain water rights, and construction-in-progress are not depreciated): Buildings Improvements Machinery and equipment Infrastructure Water Rights 10 to 50 years 15 to 80 years 3 to 15 years 3 to 80 years 80 to 100 years K. Compensated Absences Annual leave is based on a graduated scale of years of employment and is credited to each employee as it accrues. Annual leave hours vary according to years of employment and job class, and are either taken as time off from work or paid to employees upon separation or retirement. Sick leave accumulated in excess of 520 hours (728 hours for fire personnel) is convertible annually to a partial cash benefit. Sick leave is convertible to a cash benefit upon retirement or death of the employee (at 100%) or upon resignation (at 50%) when the employee has ten or more years of service (calculated at a five-year average hourly rate). For the governmental funds, a liability for compensated absences is reported only if they have matured, for example, as a result of employee resignations and retirements. For the government-wide financial statements, as well as the proprietary fund financial statements, all of the outstanding compensated absences are recorded as a liability. L. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. 53 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as an other financing source. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. The debt service funds are specifically established to account for and service the long-term obligations for the governmental funds and special assessment debt. Each enterprise fund individually accounts for and services the applicable bonds that benefit these funds. Long-term obligations are recognized as a liability of a governmental fund when due, or when resources have been accumulated for payment early in the following year. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. M. Transactions Between Funds Transactions that would be recorded as revenues and expenditures/expenses if they involved entities external to the governmental unit are recorded as revenues and expenditures/expenses in the respective funds. Transactions constituting a reimbursement of a fund for expenditures/expenses originally recorded in that fund, but properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund, and as reductions of the expenditures/expenses in the fund which is reimbursed, excluding indirect administrative costs which are recorded as revenues and expenditures/expenses in the related funds. Indirect administrative expenses represent overhead costs which have been allocated to the enterprise funds based upon a formula approved with the budget. All other interfund transactions are reported as transfers. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the governmentwide financial statements as “internal balances”. Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in the applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. See Note 6 for further discussion of the interfund receivables/payables at June 30. N. Property Tax Gilbert's property tax levy is adopted by the Council each year on or before the third Monday of August, based on the previous year's limited property value as of the lien date (January 1). Maricopa County, at no charge, levies and collects all property taxes. Levies are due and payable in two installments, on September 1 and March 1, and become delinquent on November 1 and May 1, respectively. Public auctions of properties that have delinquent real estate taxes are held in February following the May 1 delinquency of the second installment. The purchaser is given a certificate of purchase, issued by the County Treasurer. Five years from the date of sale, the holder of a certificate of purchase, which has not been redeemed, may demand of the County Treasurer, a County Treasurer's Deed. Gilbert does not levy property taxes for general operations (primary tax). Secondary property taxes are levied solely for the purpose of retiring the principal, interest, and servicing fees on voter approved general obligation bonded indebtedness. Gilbert may levy the amount deemed necessary to meet its bonded debt service requirements. State law requires municipalities to adopt a property tax levy based on the amount of scheduled and projected debt service for the year plus a reasonable amount for delinquencies and certain costs. For fiscal year 2019, Gilbert’s property tax rate is $0.99 per $100 of secondary assessed valuation. 54 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 O. Deferred Outflows/Inflows of Resources On the government-wide and proprietary funds Statement of Net Position, deferred outflows of resources are reported and represent a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expenditure/expense) until then. Gilbert has two items that qualify for reporting in this category. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. A deferred charge on pension and other postemployment-related items results from the difference between expected and actual experience and also changes in proportion and differences between Gilbert contributions and proportionate share of contributions. These amounts are deferred and will be recognized as an expenditure/expense in future periods. On the governmental funds Balance Sheet, deferred inflows of resources are reported and represent an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. Gilbert only has one item, which arises under a modified accrual basis of accounting, which qualifies for reporting in this category. The governmental funds report unavailable revenues from several sources: special assessments, court fines, and sales tax. These amounts are deferred and recognized as an inflow of resources in the period that the amount becomes available. On the government-wide and proprietary funds Statement of Net Position, deferred inflows of resources are reported on pension and other postemployment-related items for the net difference between projected and actual investment earnings on pension and other postemployment plan investments. These amounts are amortized as an expenditure/expense in future periods. P. Postemployment Benefits For purposes of measuring the net pension and other postemployment benefits (OPEB) assets and liabilities, deferred outflows of resources and deferred inflows of resources related to pensions and OPEB, and pension and OPEB expense, information about the plans’ fiduciary net position and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Q. Fund Balance Classifications Fund balance classifications comprise a hierarchy based primarily on the extent to which Gilbert is bound to observe constraints imposed upon the use of the resources reported in the governmental funds. Nonspendable and Restricted fund balances represent the restricted classifications and Committed, Assigned and Unassigned represent the unrestricted classifications. Nonspendable fund balance includes amounts that cannot be spent because they are either (a) not in spendable form such as inventory or (b) legally or contractually required to be maintained intact. Restricted fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed externally by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. Committed fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed internally by formal action of the Council. Formal action by Council through resolution is required to establish, modify or rescind committed fund balance. Assigned fund balance includes amounts that are limited to specific purposes by management. Per the Policies of Responsible Financial Management, Council has authorized the Finance & Management Services Director to assign fund balance amounts to a specific purpose. Unassigned fund balance represents the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any other governmental fund can report a negative unassigned fund balance. 55 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, as a general rule, restricted resources are considered spent before unrestricted. Within unrestricted, committed amounts would be reduced first, followed by assigned amounts (if available) and then unassigned amounts. As of June 30, 2019, the fund balance details by classification are listed below: Major Debt Service Funds Fund Balances: Nonspendable: Advances Prepaid items Restricted for: Capital projects Court/public safety programs Debt service Federal/state/local grants Highways and streets Contract agreements Parks & recreation programs Special districts Assigned to: Capital replacement Capital projects Highways and streets Management and policy Unassigned: Total fund balances Streets Special Revenue General $ 23,054,621 6,499 17,199,383 15,197,334 9,175,193 58,724 89,786,960 $ 154,478,714 $ - General $ - Major Capital Project Funds Special Assessments $ - Streets & Traffic $ - Municipal Facilities Parks $ - $ - Other Gov't $ Total - $ 23,054,621 6,499 7,581,283 - 4,296,072 - 74,395 - 74,997,921 - 16,698,124 - 3,536,522 - 2,183,688 426,356 24,199 63,884 587,640 95,232,567 2,183,688 4,370,467 426,356 7,581,283 24,199 63,884 587,640 $ 7,581,283 $ 4,296,072 74,395 $ 74,997,921 $ 16,698,124 (15,635,731) $ (12,099,209) (1,787,772) $ 1,497,995 17,199,383 15,197,334 9,175,193 58,724 72,363,457 $ 247,525,295 $ R. Statement of Cash Flows A statement of cash flows classifies cash receipts and payments according to whether they stem from operating, noncapital financing, capital and related financing, or investing activities. For purposes of the statement of cash flows, all highly liquid investments (including restricted assets) with an original maturity of three months or less when purchased are considered cash equivalents. S. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make a number of estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Statement of Net Position/Balance Sheet and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. Note 2 - Budgetary Basis of Accounting Budgetary comparison statements for the General Fund and major special revenue funds are presented in the basic financial statements. These statements display original budget, amended budget, and actual results. Budgetary comparison schedules are also included as supplementary schedules for the other governmental funds. The budgets for the proprietary funds are adopted on a basis other than GAAP. For these funds, the budgetary schedules include a reconciliation of the adjustments required to convert budgetary revenues and expenses to GAAP revenues and expenses. 56 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 The primary differences between the GAAP and budget basis statements for the proprietary funds are: 1. Obligations for compensated absences, postemployment benefits, net pension liability, and rebatable arbitrage are accrued on the GAAP basis but are not recognized on the budget basis. 2. Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. 3. Debt service principal payments are not recorded as expenses on the GAAP basis but are recognized as expenses on the budget basis. 4. Depreciation is expensed on the GAAP basis but is not recognized on the budget basis. 5. Capital assets contributed by developers are recognized as revenue on the GAAP basis but are not recognized on the budget basis. Note 3 – Change in Accounting Principle and Beginning Balances Net position as of July 1, 2018, has been restated for several reasons, as described below. Change in reporting of sales tax revenue During fiscal year 2019, the Arizona Department of Revenue (ADOR) began including information detailing the specific month the underlying transaction resulting in privilege tax took place with each sales tax remittance. Due to this change, there were revenues received in fiscal year 2019 that related to fiscal year 2018. Storm water function moved to enterprise fund The storm water function was previously recorded in the Streets Special Revenue Fund and the associated assets were recorded in governmental activities. Storm water is now recorded in the Environmental Services Fund. As such, the associated assets and accumulated depreciation were moved from governmental activities to the Environmental Services Fund within business-type activities. Creation of new capital project funds Effective for fiscal year 2019, new capital project funds were added to increase transparency of types of capital project spending. Combination of funds Several nonmajor funds were combined because of similar activities being recorded in each. The CDBG/HOME Fund was moved into the Grants Fund and the Streetlight Improvement District and Parkway Improvement District Funds were combined into the Special Districts Fund. Furthermore, the balance of Outside Sources Capital Projects Fund was moved to the General Fund. Fund balance as previously reported at June 30, 2018 Sales tax received in July 2018 that related to fiscal year 2018 Movement of Assigned fund balance in Other Special Revenue funds Movement of Outside Sources Fund Creation of new capital project funds Fund balance as restated, July 1, 2018 General General Obligation Bonds Capital Projects System Development Fees Capital Projects $ 131,700,741 $ 62,764,480 $ 23,350,233 Streets & Traffic Capital Projects $ - Parks Capital Projects $ - $ Municipal Facilities Capital Projects Other Governmental Funds - $ 35,160,089 7,809,353 56,473 15,914,089 $ 155,480,656 $ (62,764,480) - $ (23,350,233) - 57 86,099,998 $ 86,099,998 30,415,320 $ 30,415,320 (14,091,581) $ (14,091,581) (56,473) (15,914,089) (16,309,024) $ 2,880,503 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Fund balance as previously reported at June 30, 2018 Fund combinations Fund balance as restated, July 1, 2018 $ Grants 652,286 $ CDBG/ HOME 11,977 $ 11,977 664,263 $ (11,977) - Net position as previously reported at June 30, 2018 Sales tax received in July 2018 that related to fiscal year 2018 Reclass storm water infrastructure Reclass storm water accumulated depreciation Net position as restated, July 1, 2018 Streetlight Improvement District $ 172,067 Special Districts $ - $ 484,454 484,454 $ (172,067) - Parkway Improvement District $ 312,387 $ (312,387) - Governmental Activities Business-Type Activities Environmental Services $ 912,950,148 $ 816,467,269 $ 31,357,127 7,809,353 (60,461,757) 60,461,757 60,461,757 42,626,963 $ 902,924,707 (42,626,963) $ 834,302,063 (42,626,963) $ 49,191,921 Other Special Revenue $ 1,788,259 $ (56,473) 1,731,786 Note 4 - Deposits and Investments The Arizona Revised Statutes require a pooled collateral program for public deposits and a Statewide Collateral Pool Administrator (Administrator) in the State Treasurer’s Office. The purpose of the pooled collateral program is to ensure that governmental entities’ public deposits placed in participating depositories are secured with collateral of 102% of the public deposits, less any applicable deposit insurance. An eligible depository may not retain or accept any public deposit unless it has deposited the required collateral with a qualified escrow agent or the Administrator. The Administrator manages the pooled collateral program, including reporting on each depository’s compliance with the program. The investment of public monies is also regulated by the Arizona Revised Statutes Title 35. Gilbert limits its investments to the Local Government Investment Pools 7 and 700 (that only invest in U.S. government securities and managed by the Arizona State Treasurer), U.S. government securities, certificates of deposit, bonds, commercial paper, corporate notes and money market accounts. The State Board of Investment provides oversight for the State Treasurer’s pools. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares, and the participant’s shares are not identified with specific investments. Participants in the pool are not required to categorize the value of shares in accordance with the fair value hierarchy. Gilbert categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Investments categorized as Level 1 are valued using prices quoted in active markets for those investments. Investments categorized as Level 2 are valued using quoted market prices for similar assets or liabilities in active markets. Gilbert had total investments of $546,716,442 at June 30, 2019. Gilbert categorizes certain investments within the fair value hierarchy established by generally accepted accounting principles, were as follows: 58 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Investment Type U.S. Government Treasuries U.S. Government Agencies Certificates of Deposit Corporate Notes Money Market - U.S. Treasuries Total Investments Categorized by Fair Value Level Amount $ 230,049,311 124,811,133 49,327,112 85,706,533 24,103,869 $ 513,997,958 External Investment Pools Measured at Fair Value State Treasurer's Investment Pool Total Investments Measured at Fair Value 32,718,484 $ 546,716,442 Fair Value Measurement Using Level 1 Level 2 $ 230,049,311 $ 124,811,133 49,327,112 85,706,533 24,103,869 $ 230,049,311 $ 283,948,647 Interest rate risk – Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As a means of limiting its exposure to fair value losses arising from rising interest rates, Gilbert’s investment policy limits its investment portfolio to maturities of five years or less. At June 30, 2019, Gilbert’s investment maturities were as follows: Investment Type U.S. Government Treasuries U.S. Government Agencies Certificates of Deposit Corporate Notes State Treasurer's Investment Pool Money Market - U.S. Treasuries Total Fair Value $ 230,049,311 124,811,133 49,327,112 85,706,533 32,718,484 24,103,869 $ 546,716,442 Investment Maturities (in Years) Less than 1 1-3 $ 21,473,399 $ 208,575,912 5,587,586 119,223,547 11,420,587 37,906,525 50,096,624 35,609,909 6,978,334 25,740,150 24,103,869 $ 119,660,399 $ 427,056,043 Credit risk – Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. Gilbert addresses credit risk through its investment policy by restricting the allowable investment instruments. As of June 30, 2019, the investments in the U.S. Government Agencies were rated AA+ and the investments in Corporate Notes ranged from BBB+ ratings to AAA ratings. Gilbert’s investment in the State Treasurer’s Investment Pool did not receive a credit quality rating from a national rating agency. Custodial credit risk - deposits – Custodial credit risk is the risk that in the event of a bank failure, the Town’s deposits may not be returned. As of June 30, 2019, Gilbert’s bank balance was $26,423,255, of which $21,040,380 was with JP Morgan and $5,382,875 was held in a trust account with Bank of New York. $20,790,380 of JP Morgan’s bank balance and $5,132,875 of the Bank of New York’s balance was exposed to custodial credit risk. JP Morgan’s balance was uninsured but collateralized with securities held by the pledging financial institution’s trustee. These securities are not in Gilbert’s name, but cannot be released without Gilbert’s authorization. Bank of New York’s balance was uninsured and not collateralized. At the end of each day, a portion of Gilbert’s bank balance is transferred to a sweep investment account. 59 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Custodial credit risk - investments – The custodial credit risk for investments is the risk that, in the event of the failures of the counterparty (e.g. broker-dealer) to a transaction, Gilbert will not be able to recover the value of its investment or collateral securities that are in the possession of another party. Gilbert’s investment policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by Gilbert be conducted on a delivery-versus-payment basis. Securities are to be held by a third-party custodian. Gilbert’s investment in the State Treasurer’s Investment Pool represents a proportionate interest in the Pool’s portfolio; however, Gilbert’s portion is not identified with specific investments and is not subject to custodial credit risk. Concentration of credit risk - Gilbert’s investment policy limits corporate notes to 20% of total funds and 3% per issuer. As of June 30, 2019, of Gilbert’s investments, 23% were in U.S. Government Agencies, 16% were in Corporate Notes, 9% were in Certificates of Deposit, 46% were in U.S. Government Treasuries and 6% were in the State Treasurer’s Investment Pool. Reconciliation of pooled cash and investments as reported on the statement of net position: Primary government: Carrying amount of cash Carrying amount of deposits/investments Total cash and investments $ 24,140,276 546,716,442 $ 570,856,718 Pooled cash and investments Restricted cash and investments Total cash and investments (per Statement of Net Position) Fiduciary funds Total cash and investments $ 524,470,536 46,280,269 570,750,805 105,913 $ 570,856,718 Note 5 - Taxes Receivable and Due from Other Governments The General Fund taxes receivable amount at June 30, 2019, includes $829,993 in state shared sales tax and $13,652,568 in local sales tax. Amounts in the General and Streets Special Revenue Funds shown as due from other governments represent amounts due from the State of Arizona for vehicle license tax of $424,165 and $1,491,857 in highway user revenues, respectively. Other governmental funds include federal grant receivables of $504,743 from the U.S. Department of Housing and Urban Development, and $44,572 from the U.S. Department of Homeland Security. Additionally, other governmental funds include Racketeer Influenced Corrupt Organizations (RICO) funds of $996,550 from Maricopa County Attorney’s Office. The Water Fund includes $289,503 and $24,375 in amounts due from the City of Chandler for the joint operation of the SanTan Vista Water Treatment Plant and expansion expenses, respectively. The balance of these receivables represents various grants from the state and federal governments and intergovernmental agreements with other municipalities. Note 6 – Interfund Receivables and Payables The composition of interfund balances as of June 30, 2019, is shown below. Due to/from other funds are short-term loans that cover cash deficits and are recorded in the following funds (cash deficits are temporary, until reimbursements are received): Due To General Other Governmental Funds Total $ $ 60 739,342 739,342 Due From 739,342 $ 739,342 $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Advances from/to other funds are long-term loans that cover cash deficits for capital expenditures and are recorded in the following funds: Advances To $ 7,446,558 15,608,063 $ 23,054,621 General Parks Capital Projects Municipal Facilities Capital Projects Total Advances From $ 23,054,621 $ 23,054,621 Note 7 – Capital Assets A summary of changes in capital assets for governmental activities, for the fiscal year ended June 30, 2019, is as follows: July 1, 2018, as restated Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets $ Depreciable assets: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable assets Less accumulated depreciation: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Total depreciable assets, net Governmental activities capital assets, net $ a 181,849,320 65,544,603 247,393,923 Additions $ 2,562,944 63,451,533 66,014,477 $ Deletions June 30, 2019 (90,703) (40,777,110) (40,867,813) $ 265,076,330 7,814,192 73,544,532 67,264,485 1,073,487,190 1,479,372,537 2,541,549 9,686,919 30,651,693 50,694,353 (114,540,482) (10,654,804) (48,705,031) (50,831,345) (526,808,190) (740,885,048) 738,487,489 (2,962,817) (3,889,057) (37,683,428) (55,190,106) (4,495,753) 3,318,494 3,318,494 (134,016) (51,667,848) (51,401,908) (564,491,618) (792,756,660) 733,857,720 985,881,412 $ 61,518,724 $ (41,001,829) $ 1,006,398,307 a - 184,321,561 88,219,026 272,540,587 (3,452,510) (3,452,510) - 272,890,522 76,086,081 73,498,894 1,104,138,883 1,526,614,380 (125,195,286) Beginning balances were adjusted in the table above to reflect (1) a restatement to present storm water related assets as enterprise assets from governmental activities described in Note 3. 61 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Depreciation expense was charged to governmental functions in the government-wide financial statement as follows: Management and policy Finance and management services Legal and court Development services Police Fire Highways and streets Parks and recreation Total depreciation expense not including internal service funds Capital assets held by the Town's internal service funds are charged to the various functions based on their usage of the assets Total depreciation expense - governmental activities $ 624,527 323,441 459,768 2,352,021 2,773,383 3,385,935 39,026,889 6,229,516 $ 55,175,480 14,626 $ 55,190,106 A summary of changes in capital assets for business-type activities, for the fiscal year ended June 30, 2019, is as follows: July 1, 2018, as restated Non-depreciable assets: Land Water Rights Construction-in-progress Total non-depreciable assets $ Depreciable assets: Plant and equipment Infrastructure Water Rights Total depreciable assets Less accumulated depreciation: Plant and equipment Infrastructure Water Rights Total accumulated depreciation Total depreciable assets, net Business-type activities capital assets, net $ a Additions 18,233,843 55,361,334 35,731,221 109,326,398 $ 5,276,778 1,768,613 21,676,113 28,721,504 $ Deletions June 30, 2019 (16,197,103) (16,197,103) $ 23,510,621 57,129,947 41,210,231 121,850,799 145,690,332 576,079,423 9,146,281 730,916,036 6,754,967 24,752,011 31,208,238 62,715,216 (3,060,447) (3,060,447) 149,384,852 600,831,434 40,354,519 790,570,805 (76,333,316) (215,996,340) (2,183,871) (294,513,527) 436,402,509 (6,869,237) (14,519,053) (124,354) (21,512,644) 41,202,572 3,060,447 3,060,447 - (80,142,106) (230,515,393) (2,308,225) (312,965,724) 477,605,081 545,728,907 $ 69,924,076 $ (16,197,103) a $ 599,455,880 Beginning balances were adjusted in the table above to reflect (1) the exclusion of construction-inprogress related to an investment in joint venture, and (2) a restatement to present storm water related assets as enterprise assets from governmental activities described in Note 3. 62 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Note 8 – Construction-in-Progress and Commitments Governmental activities construction-in-progress and related construction commitments at June 30, 2019, were as follows: Streets and traffic Parks Municipal facilities Redevelopment Total Constructionin-Progress $ 28,148,508 27,804,630 8,913,469 23,352,419 $ 88,219,026 Commitments $ 14,814,858 19,058,853 1,492,388 2,296,458 $ 37,662,557 Business-type activities construction-in-progress and related construction commitments at June 30, 2019, were as follows: Constructionin-Progress $ 18,327,325 22,794,875 88,031 $ 41,210,231 Water system Wastewater system Environmental services Total Commitments $ 7,714,239 13,407,905 $ 21,122,144 Note 9 - Risk Management Traditional Commercial Insurance Programs Gilbert operates with traditional commercial insurance programs against major losses in property, plant, equipment, and liability. Administrative responsibility for the safety program and education resides with the Office of the Town Manager. Administrative responsibility for risk management resides with the Office of the Town Attorney. Insurance is procured on a competitive quotation basis, using the services of an independent broker as a consultant. Gilbert processes all claims and evaluates their validity to determine if insurance reporting is warranted, or if the claim can be resolved administratively. Claims settled administratively, which are generally less than the deductibles of the appropriate policy, are paid from the funds where the claims occurred. During fiscal year 2019, there was no reduction in insurance coverage from prior years. Additionally, settlements have not exceeded insurance coverage during any of the last three fiscal years. Self-Insurance Gilbert has established an employee benefit self-insurance trust (Trust) to account for and finance its uninsured risks of loss for medical claims. All Trust activity is recorded in the Employee Benefit Self-Insurance Fund. Gilbert purchases commercial stop loss insurance to limit the claims liability to the Trust. The stop loss insurance provides reimbursement to the Trust for medical claims incurred by an individual member in excess of $250,000 after an additional $125,000 aggregate plan risk retention. Premiums are paid into the Employee Benefit Self-Insurance Fund by all other funds and are available to pay claims and administrative costs of the program and fund claim reserves. As with any risk retention program, Gilbert is contingently liable with respect to claims beyond those actuarially projected. 63 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 The claims liability of $1,700,000 reported in the employee benefit self-insurance trust at June 30, 2019, is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability be reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). The Trust includes medical and dental benefits. For fiscal year 2019, increases of $176,000 and $10,000 were recorded for IBNR claims under the medical and dental plans, respectively. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of payouts and other economic and social factors. Fiscal year 2019 reflected an increase in claims costs of $1,387,654 from fiscal year 2018. This was due to an increase of $1,429,089 in medical claims and a decrease of $41,435 in dental claims. Changes in the fund’s claim liability amount in fiscal years 2019 and 2018 were: Claim Liability at Beginning of Fiscal Year $ 1,514,000 1,650,317 Year Ended, June 30 2019 2018 Fiscal Year Claims and Changes in Estimates $ 15,279,349 13,891,695 Fiscal Year Claim Payments $ (15,093,349) (14,028,012) Claim Liability at End of Fiscal Year $ 1,700,000 1,514,000 Note 10 – Long-Term Debt General Obligation Bonds Gilbert issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both governmental and business-type activities. Currently, there are no outstanding general obligation bonds for business-type activities. General obligation bonds are direct obligations and pledge the full faith and credit of Gilbert. General obligation bonds outstanding at June 30, 2019, were as follows: Governmental 2008 General Obligation Bonds, 3.0% to 5.0%, original amount $187,990,000, annual retirements due July 1, 2009, through July 1, 2023 $ 2017 General Obligation and General Obligation Refunding Bonds, Series 2017, 3.0% to 5.0%, original amount $121,670,000, annual retirements due July 1, 2017, through July 1, 2036 Total 94,445,000 $ 64 16,000,000 110,445,000 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2036 Governmental Activities Principal Interest $ 17,480,000 $ 4,769,550 18,355,000 3,895,550 16,180,000 2,977,800 16,000,000 2,168,800 2,485,000 1,688,800 14,350,000 6,512,650 17,615,000 3,240,100 7,980,000 360,900 $ 110,445,000 $ 25,614,150 Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt for combined water, wastewater, electric, parks and open space, streets, and public safety purposes may not exceed 20% of Gilbert's net full cash (NFC) valuation, nor may outstanding general obligation bonded debt for all other purposes exceed 6% of Gilbert's NFC valuation. The following is a summary of legal borrowing capacity at June 30, 2019: Water, Wastewater, Electric, Streets, Fire, Police, and Parks and Open Space Special Purpose Bonds NFC - Assessed Valuation $ 2,831,095,155 All Other General Obligation Bonds NFC - Assessed Valuation 20% constitutional limit Less general obligation bonds outstanding Less premium adjustment Available 20% limitation borrowing capacity 6% constitutional limit Less general obligation bonds outstanding Less premium adjustment Available 6% limitation borrowing capacity $ 566,219,031 (110,445,000) (8,090,801) $ 447,683,230 $ 2,831,095,155 $ 169,865,709 - $ 169,865,709 Special Assessment Bonds with Governmental Commitment As trustee for the improvement districts, Gilbert is responsible for collection of assessments levied against the owners of property within the improvement districts and for disbursement of these amounts for retirement of the respective bonds issued to finance the improvements. At June 30, 2019, the special assessments receivable, together with amounts paid in advance and interest to be received over the life of the assessment period, were adequate for the scheduled maturities of the bonds payable and the related interest. Special assessment bonds are collateralized by properties within the districts. In the event of default by the owner, Gilbert may enforce an auction sale to satisfy the debt service requirements of the improvement bonds. Gilbert is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. 65 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Special assessment bonds outstanding at June 30, 2019, were as follows: Governmental 2002 Improvement District #19 Bonds, 5.2%, original amount $6,510,000, annual retirements due January 1, 2005, through January 1, 2027 $ 2009 Improvement District #20 Bonds, 5.1%, original amount $8,675,000, annual retirements due January 1, 2012, through January 1, 2029 Total 85,000 4,810,000 $ 4,895,000 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending 2020 2021 2022 2023 2024 2025-2029 Governmental Activities Principal Interest $ 385,000 $ 239,907 410,000 219,625 435,000 198,067 450,000 175,490 475,000 151,893 2,740,000 360,618 $ 4,895,000 $ 1,345,600 Municipal Property Corporation (MPC) Revenue Bonds The Public Facilities MPC exists solely for the purpose of financing the cost of acquisition of certain interests in real property to locate public safety and parks and recreation facilities, the costs of design, construction and outfitting of parks and recreation facilities and a parking facility (the 2009 issue); the cost of design and construction of Fire and Rescue Station #9 (the 2017 issue); and the refunding of certain maturities of outstanding bonds (the 2011, 2014, and 2017 issues). The Water MPC exists solely for the purpose of financing the construction of water and wastewater capital improvement projects. (See also Note 17 regarding Pledged Revenues.) 66 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Municipal property corporation revenue bonds outstanding at June 30, 2019, were as follows: 2009 Public Facilities Municipal Property Corporation Revenue Bonds, 4.0% to 5.5%, original amount $80,585,000, annual retirements due July 1, 2009 through July 1, 2028 Governmental Business-Type $ $ 3,535,000 - 2011 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 3.0% to 4.75%, original amount $20,980,000, annual retirements due July 1, 2013 through July 1, 2021 7,935,000 - 2014 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 2.0% to 5.0%, original amount $28,080,000, annual retirements due July 1, 2016 through July 1, 2021 16,715,000 - 2017 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 3.0% to 5.0%, original amount $43,075,000, annual retirements due July 1, 2018 through July 1, 2027 38,925,000 - 2017 Public Facilities Municipal Property Corporation Revenue Bonds, 4.0% to 5.0%, original amount $6,450,000, annual retirements due July 1, 2022 through July 1, 2027 6,450,000 - 2016 Water Resources Municipal Property Corporation, Senior Lien Utility System Revenue and Revenue Refunding Bonds, 2.25% to 5.0%, original amount $115,940,000, annual retirements due July 1, 2017 through July 1, 2036 - 106,055,000 2018 Water Resources Municipal Property Corporation, Senior Lien Utility System Revenue Bonds, 3.0% to 5.0%, original amount $37,460,000 annual retirements due July 1, 2018 through July 1, 2031 - 34,035,000 Total $ 67 73,560,000 $ 140,090,000 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Annual debt service requirements to maturity for MPC revenue bonds are as follows: Year Ending 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2037 Governmental Activities Principal Interest $ 15,800,000 $ 3,345,162 12,805,000 2,659,788 14,590,000 1,991,212 5,500,000 1,508,250 5,770,000 1,243,250 19,095,000 1,940,750 $ 73,560,000 $ 12,688,412 Business-type Activities Principal Interest $ 7,225,000 $ 6,036,238 7,560,000 5,676,312 7,950,000 5,288,563 8,340,000 4,881,313 8,780,000 4,453,313 50,690,000 15,367,405 39,585,000 5,034,700 9,960,000 608,000 $ 140,090,000 $ 47,345,844 University Revenue Obligations The University Revenue Obligations were issued specifically for the purpose of providing funds to design and construct a four-story building to be utilized for educational purposes. These obligations are payable solely from the revenues generated by excise taxes and state-shared revenue. Subordinate lien pledged revenue obligations outstanding at June 30, 2019, were as follows: Governmental Subordinate Lien Pledged Revenue Obligations, Series 2015, 3.0% to 5.0% original amount $36,980,000, annual retirements due July 1, 2017 through July 1, 2045 $ 35,655,000 Annual debt service requirements to maturity for subordinate lien pledged revenue obligations are as follows: Year Ending 2020 2021 2022 2023 2024 2025-2029 2030-2034 2035-2039 2040-2044 2045-2046 Governmental Activities Principal Interest $ 700,000 $ 1,541,956 735,000 1,506,081 770,000 1,468,456 810,000 1,428,957 850,000 1,387,456 4,935,000 6,238,157 6,165,000 5,010,609 7,355,000 3,797,697 9,040,000 2,203,266 4,295,000 217,375 $ 35,655,000 $ 24,800,010 68 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2019, was as follows: Balance July 1, 2018 Governmental activities: Bonds payable: General obligation bonds Special assessment bonds with government commitment Revenue bonds Revenue obligations Unamortized bond premium Total bonds payable Compensated absences Other postemployment benefits Net pension liability Total long-term liabilities Business-type activities: Bonds payable: Revenue bonds Unamortized bond premium Total bonds payable Compensated absences Other postemployment benefits Net pension liability Total long-term liabilities $ 128,090,000 Additions Reductions Balance June 30, 2019 - $ (17,645,000) $ $ 5,445,000 88,355,000 36,325,000 25,696,029 283,911,029 17,468,372 1,643,599 123,256,787 6,213,846 - (550,000) (14,795,000) (670,000) (3,169,917) (36,829,917) (8,334,778) (902,661) (8,100,794) 110,445,000 Due Within One Year $ 4,895,000 73,560,000 35,655,000 22,526,112 247,081,112 15,347,440 740,938 115,155,993 17,480,000 385,000 15,800,000 700,000 34,365,000 5,240,920 - $ 426,279,787 $ 6,213,846 $ (54,168,150) $ 378,325,483 $ 39,605,920 $ 148,570,000 21,947,212 170,517,212 2,637,447 374,387 20,829,038 $ 1,307,453 - $ (8,480,000) (1,534,731) (10,014,731) (1,538,655) (219,233) (2,064,765) $ 140,090,000 20,412,481 160,502,481 2,406,245 155,154 18,764,273 $ 7,225,000 7,225,000 851,666 - $ 194,358,084 $ 1,307,453 $ (13,837,384) $ 181,828,153 $ 8,076,666 Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above totals for governmental activities. At year-end, $211,860 of internal service funds compensated absences, $2,044,993 net pension liability, and $15,572 of other post-employment benefits liability are included in the above amounts. Long-term compensated absences, other postemployment benefits, and the net pension liability of governmental activities are expected to be liquidated by the operating funds (primarily the General Fund and the Streets Special Revenue fund) as they come due. The Town does not have any outstanding notes from direct borrowings or direct placements, no assets pledged as collateral for debt, nor any outstanding lines of credit. Conduit Debt Obligations The Industrial Development Authority, a discretely presented component unit of the Town of Gilbert, has issued Industrial Revenue Bonds and Master Lease and Sublease Agreements to provide financial assistance to private sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. Neither Gilbert, Maricopa County nor the State of Arizona shall, in any event, be liable for payment of principal, premium or interest on these bonds and leases, and accordingly, they have not been reported in the accompanying combined financial statements. At June 30, 2019, Industrial Development Authority Revenue Bonds and Master Lease and Sublease Agreements outstanding were $23,620,000 and $5,554,331 respectively. 69 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Note 11 – Pension and Other Postemployment Benefits Gilbert contributes to the pension plans described below. Gilbert contributes to the Elected Officials Retirement Plan (EORP), Arizona State Retirement System (ASRS) health insurance premium supplement OPEB plan, ASRS long-term disability (OPEB) plan, Public Safety Retirement System (PSPRS) health insurance premium benefit (OPEB) plan, and Gilbert also provides post-employment medical care, prescription drug, and dental care for retired employees through a single-employer defined benefit medical and dental plan. The ASRS, PSPRS, and EORP OPEB plan information is not disclosed in detail in this note due to their relative insignificance to the financial statements. See Note 12 for information on Gilbert’s OPEB plan. The ASRS and PSPRS plans are component units of the State of Arizona. Pension and OPEB Statement of Net Position and Statement of Activities Governmental Activities Business-Type Activities Assets: OPEB - ASRS $ $ 49,506 Deferred Outflow of Resources: OPEB - ASRS OPEB - PSPRS OPEB - Town Pension - ASRS Pension - PSPRS Pension - EORP Total 536,672 114,695 782,679 7,585,734 35,443,975 660,529 $ 45,124,284 $ 201,525 200,394 2,833,175 3,235,094 738,197 114,695 983,073 10,418,909 35,443,975 660,529 $ 48,359,378 $ 71,092 84,062 155,154 260,416 223,300 412,376 896,092 Liabilities: OPEB - ASRS OPEB - PSPRS OPEB - Town $ 131,838 189,324 223,300 328,314 740,938 Total $ $ 181,344 Liabilities: Pension - ASRS Pension - PSPRS Pension - EORP Total 50,599,944 61,082,090 3,473,959 $ 115,155,993 18,764,273 $ 18,764,273 69,364,217 61,082,090 3,473,959 $ 133,920,266 Deferred Inflow of Resources: OPEB - ASRS OPEB - PSPRS OPEB - Town Pension - ASRS Pension - PSPRS Pension - EORP Total 403,598 493,851 1,832,410 5,982,137 3,041,182 30,113 $ 11,783,291 $ 151,555 469,162 2,218,392 2,839,109 555,153 493,851 2,301,572 8,200,529 3,041,182 30,113 $ 14,622,400 Pension Expense: ASRS PSPRS EORP Total 1,285,419 12,732,708 1,357,474 $ 15,375,601 $ 438,332 438,332 1,723,751 12,732,708 1,357,474 $ 15,813,933 $ 74,665 7,880 82,545 273,404 184,441 37,553 495,398 OPEB Expense: ASRS PSPRS Town Total $ 198,739 184,441 29,673 412,853 $ Gilbert reported $25,247,279 of pension and OPEB contributions as expenditures in the governmental funds related to all pension plans to which it contributed for fiscal year 2019. 70 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 A. Arizona State Retirement System Plan Description – Gilbert employees not covered by the other pension plans described below participate in the ASRS. The ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a costsharing multiple-employer defined benefit health insurance premium supplement (OPEB) plan, and a costsharing multiple-employer defined benefit long-term disability (OPEB) plan. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes financial statements and required supplementary information. This report is available on their website at www.azasrs.gov. Benefits Provided – The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Years of service and age required to receive benefit Final average salary based on Benefit percent per year of service Retirem ent Initial Mem bership Date: Before July 1, 2011 On or After July 1, 2011 Sum of years and age equals 80 30 years, age 55 10 years, age 62 25 years, ago 60 5 years, age 50* 10 years, age 62 Any years, age 65 5 years, age 50* Any years, age 65 Highest 36 consecutive months of last 120 months Highest 60 consecutive months of last 120 months 2.1% to 2.3% 2.1% to 2.3% * With actuarially reduced benefits. Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the retirement benefit option chosen determines the survivor benefit. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. Contributions – In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2019, statute required active ASRS members to contribute at the actuarially determined rate of 11.8% (11.64% for retirement and 0.16% for long term disability) of the members’ annual covered payroll, and statute required Gilbert to contribute at the actuarially determined rate of 11.8% (11.18% for retirement, 0.46% for health insurance premium benefit, and 0.16% for long-term disability) of the members’ annual covered payroll. In addition, Gilbert was required by statute to contribute at the actuarially determined rate of 10.53% (10.41% for retirement, 0.06% for health insurance premium benefit, and 0.06% for long-term disability) of annual covered payroll of retired members who worked for Gilbert in positions that an employee who contributes to the ASRS would typically fill. During fiscal year 2019, Gilbert paid for ASRS pension and OPEB contributions as follows: 61% from the general fund, 38% from major funds, and 1% from other funds. The contributions to the pension plan for fiscal year 2019 were $5,921,577. 71 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Pension Liability – At June 30, 2019, Gilbert reported a liability of $69,364,217 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2018. The total pension liability used to calculate the net pension liability was determined using updated procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2017, to the measurement date of June 30, 2018. The total pension liability as of June 30, 2018 reflects changes in actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016, including decreasing the discount rate from 8.0% to 7.5%, changing the projected salary increased from 3.0-6.75% to 2.7-7.2%, decreasing the inflation rate from 3.0% to 2.3%, and changing the mortality rates. Gilbert’s proportion of the net pension liability was based on Gilbert’s actual contributions to the plan relative to the total of all participating employers’ contributions for the year ended June 30, 2018. Gilbert’s proportion measured as of June 30, 2018, was 0.49736%, which was an increase of 0.00415% from its proportion measured as of June 30, 2017. Gilbert’s reported liability at June 30, 2019, decreased by $7,468,287 from the prior year liability of $76,832,504 because of changes in the ASRS’ net pension liability and Gilbert’s proportionate share of that liability. The ASRS’ publicly available financial report provides details on the change in the net pension liability. The allocation of pension liability to the funds is based on employer contributions for the fiscal year. Pension Expense and Deferred Outflows/Inflows of Resources – For the year ended June 30, 2019, Gilbert recognized pension expense for ASRS of $1,723,751. At June 30, 2019, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Differences between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between Gilbert contributions and proportionate share of contributions Gilbert contributions subsequent to the measurement date Total $ 1,910,928 1,835,504 Deferred Inflows of Resources $ - $ 750,900 5,921,577 10,418,909 382,394 6,150,090 1,668,045 $ 8,200,529 The $5,921,577 reported as deferred outflows of resources related to ASRS pensions resulting from Gilbert’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Year Ending June 30 2020 2021 2022 2023 2024 Thereafter $ 72 Amount 1,035,918 (1,460,759) (2,530,302) (748,054) - TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial rollforward date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2017 June 30, 2018 Entry age normal 7.5% 2.7% - 7.2% 2.3% Included 2017 SRA Scale U-MP Actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The long-term expected rate of return on ASRS pension plan investments was determined to be 7.5% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Equity Fixed income Real estate Target Allocation 50% 30% 20% 100% Long-Term Expected Geometric Real Rate of Return 5.50% 3.83% 5.85% Discount Rate – At June 30, 2018, the discount rate used to measure the ASRS total pension liability was 7.5%, which was a decrease of 0.5% from the discount rate used as of June 30, 2017. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 73 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Sensitivity of Gilbert’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate – The following presents Gilbert’s proportionate share of the net pension liability calculated using the discount rate of 7.5%, as well as what Gilbert’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1 percentage point higher (8.5%) than the current rate: 1% Decrease (6.5%) Gilbert's proportionate share of the net pension liability $ 98,880,287 Current Discount Rate (7.5%) $ 69,364,217 1% Increase (8.5%) $ 44,704,017 Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. The report is available on the ASRS website at www.azasrs.gov. B. Public Safety Personnel Retirement System Plan Description – Gilbert public safety employees who are regularly assigned hazardous duty participate in the PSPRS or employees who became members on or after July 1, 2017, may participate in the Public Safety Personnel Defined Contribution Retirement Plan (PSPDCRP). The PSPRS administers agent and cost-sharing multiple-employer defined benefit pension plans and agent multiple-employer defined benefit health insurance premium benefit (OPEB) plans. A nine-member board known as the Board of Trustees and the participating local boards govern the PSPRS according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. Employees who became PSPRS members on or after July 1, 2017, participate in the cost-sharing plans (PSPRS Tier 3 Risk Pool) which are not further disclosed because of their relative insignificance to Gilbert’s financial statements. The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. This report is available on their website at www.psprs.com. 74 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Benefits Provided – The PSPRS provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Retirement and disability benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Before January 1, 2012 Retirem ent and Disability: Years of service and age required to receive benefit Final average salary based on Benefit percent Normal retirement Initial Mem bership Date: On or after January 1, 2012 and before July 1, 2017 On or after July 1, 2017 20 years of service, any age 15 years of service, age 62 25 years of service or 15 years of credited service, age 52.5 15 years of credited service, age 52.5* 15 or more years of service, age 55 Highest 36 months of last 20 years Highest 60 months of last 20 years Highest 60 months of last 15 years 50% less 2.0% for each year of credited service less than 20 years OR plus 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% 1.5% to 2.5% per year of credited service, not to exceed 80% Accidental disability retirement 50% plus normal retirement, w hichever is greater Catastrophic disability retirement 90% for the first 60 months then reduced to either 62.5% or normal retirement, w hichever is greater Ordinary disability retirement Normal retirement calcuated w ith actual years of credited service or 20 years of credited service, w hichever is greater, multiplied by years of credited service (not to exceed 20 years) divided by 20 Survivor Benefit: Retired members Active members 80% to 100% of retired member's pension benefit 80% to 100% of accidental disability benefit or 100% of average monthly compensation if death w as the result of injuries received on the job * With actuarially reduced benefits. Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on inflation. PSPRS also provides temporary disability benefits of 50% of the member’s compensation for up to 12 months. Employees Covered by Benefit Terms – At June 30, 2019, the following employees were covered by the agent pension plan’s benefit terms: Police Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to by not yet receiving benefits Active employees Total 75 74 51 200 325 Fire 15 17 172 204 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Contributions and Annual OPEB Cost – State statutes establish the pension contribution requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Contribution rates for the year ended June 30, 2019 are indicated below. Rates are a percentage of active members’ annual covered payroll. Active MemberPension Police PSPRS Tier 1 PSPRS Tier 2 PSPRS Tier 3 Defined benefit only PSPRS Tier 3 Defined contribution only Fire PSPRS Tier 1 PSPRS Tier 2 PSPRS Tier 3 Defined benefit only PSPRS Tier 3 Defined contribution only Active MemberHealth 7.65% 11.65% 9.68% 0.26% GilbertPension GilbertHealth 32.23% 32.23% 0.32% 0.32% 26.76% 0.26% 10.51% 27.59% 7.65% 11.65% 24.35% 24.35% 0.31% 0.31% 18.64% 0.26% 9.68% 0.26% 10.51% 19.47% In addition, the statute required Gilbert to contribute at the actuarially determined rate indicated above for employees participating in the PSPRS Tier 3 Risk Pool and PSPDCRP members in addition to Gilbert’s required contributions to the PSPRS Tier 3 Risk Pool and PSPDCRP. For the agent plans, actual contributions made to the pension plan for the year ended June 30, 2019 exceeded the annual pension cost due to prepayments and an additional payment made towards the unfunded liability (100% from the General Fund): Police Pension contributions made $ 11,245,894 Fire $ 7,556,014 Pension Liability – At June 30, 2019, Gilbert reported $61,082,090 in net pension liability. The net pension liabilities were measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total liability as of June 30, 2018, reflects changes in actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016, including decreasing the investment rate of return from 7.5% to 7.4%, decreasing the wage inflation from 4.0% to 3.5%, and updating mortality, withdrawal, disability, and retirement assumptions. The total pension liability also reflects changes of benefit terms for legislation that changed benefit eligibility and multipliers for employees who became members on or after January 1, 2012, and before July 1, 2017, and a court decision that decreased the contribution rates for employees who became members before July 20, 2011. 76 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial cost method Investment rate of return Wage inflation Price inflation Cost-of-living adjustment Mortality rates June 30, 2018 Entry age normal 7.4% 3.5% 2.5% Included RP-2014 tables using MP-2016 Actuarial assumptions used in the June 30, 2018, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.4% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class U.S. equity Private credit Non-U.S. equity GTS Private equity Real estate Real assets Fixed income Risk parity Short term investments Target Allocation 16% 16% 14% 12% 12% 10% 9% 5% 4% 2% 100% Long-Term Expected Arithmetic Real Rate of Return 7.60% 6.75% 8.70% 3.96% 5.83% 3.75% 4.52% 1.25% 5.00% 0.25% Pension Discount Rates – At June 30, 2018, the discount rate used to measure total pension liability was 7.4%, which was the same as the discount rate used as of June 30, 2017. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 77 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Changes in the Agent Plans Net Pension Liability Police Total Pension Liability Balances at June 30, 2018 Changes for the year: Service cost Interest on the total pension liability Differences between expected results and actual experience in the measurement of the total pension liability $ 128,451,673 Increase/Decrease Plan Fiduciary Net Position $ 82,751,541 Net Pension Liability $ 4,056,282 9,457,916 4,056,282 9,457,916 847,849 Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2019 (5,340,286) $ 9,021,761 137,473,434 Fire Total Pension Liability Balances at June 30, 2018 Changes for the year: Service cost Interest on the total pension liability Differences between expected results and actual experience in the measurement of the total pension liability $ 85,999,161 $ 7,551,083 1,973,907 6,242,434 847,849 (7,551,083) (1,973,907) (6,242,434) (5,340,286) (95,708) 106,036 10,437,466 93,189,007 95,708 (106,036) (1,415,705) 44,284,427 $ Increase/Decrease Plan Fiduciary Net Position $ 66,311,658 Net Pension Liability $ 3,661,929 6,428,184 (1,925,561) $ 78 6,469,934 92,469,095 19,687,503 3,661,929 6,428,184 (1,694,618) Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2019 45,700,132 $ 5,035,275 1,365,916 4,953,004 (1,694,618) (5,035,275) (1,365,916) (4,953,004) (1,925,561) (76,084) 7,224 9,359,774 75,671,432 76,084 (7,224) (2,889,840) 16,797,663 $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following presents Gilbert’s net pension liability calculated using the discount rate of 7.4%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.4%) or 1 percentage point higher (8.4%) than the current rate: 1% Decrease (6.4%) Police net pension liability Fire net pension liability $ 65,779,510 32,269,393 Current Discount Rate (7.4%) $ 44,284,427 16,797,663 1% Increase (8.4%) $ 27,060,353 4,360,172 Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued PSPRS financial report. The report is available on the PSPRS website at www.psprs.com. Pension Expense – For the year ended June 30, 2019, Gilbert recognized $8,062,871 as pension expense for Police and $4,669,837 as pension expense for Fire. Pension Deferred Outflows/Inflows of Resources – At June 30, 2019, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Police Changes between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Gilbert contributions subsequent to the measurement date Total $ $ 2,595,449 6,351,922 65,327 11,245,894 20,258,592 Deferred Inflows of Resources $ $ Deferred Outflows of Resources Fire Changes between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Gilbert contributions subsequent to the measurement date Total 79 $ $ 4,126,174 3,186,241 316,954 7,556,014 15,185,383 Deferred Inflows of Resources $ $ 3,041,182 3,041,182 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 The $11,245,894 for Police and the $7,556,014 for Fire reported as deferred outflows of resources related to PSPRS pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 2020 2021 2022 2023 2024 Thereafter $ Police 3,558,266 2,912,362 1,006,746 1,101,918 275,185 158,221 $ Fire 1,306,558 924,400 185,225 730,971 707,550 733,483 Volunteer Firemen’s Relief and Pension Fund The Volunteer Firemen’s Relief and Pension Fund covers retired volunteer firemen and survivors and was established solely upon the provision for such pension and relief funds in the Arizona Revised Statutes. The statutes grant discretionary powers to Boards of Trustees of such plans related to payment/nonpayment of benefits to qualified retired or disabled volunteer firemen out of the assets of the fund. These discretionary powers do not extend, however, to the volunteer firemen’s right to their own contributions to the fund. Gilbert has no actuarial liability for pension benefits as individual retirement benefits are not defined in the plan. Reserves for pensions, therefore, have not been established as the amounts are not vested and payment of benefits (if any) is at the discretion of the Board of Trustees of the plan. Gilbert no longer operates a Volunteer Fire Department. Accordingly, there were no contributions required or made to this plan nor refunds paid for fiscal year 2019. Administrative costs are financed through investment earnings. There is only one remaining pensioner receiving retirement benefits from the fund. Note 12 - Postemployment Healthcare Benefits Under authority of Town Council, Gilbert provides postretirement insurance benefits, for certain retirees and their dependents in accordance with the Town of Gilbert, Arizona Self-Insured Trust Fund for Health Insurance Benefits. The plan is a single-employer defined benefit OPEB plan administered by Gilbert. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. Generally, retiree contributions are used to pay for postemployment benefits. Benefits Provided – Gilbert provides postemployment medical care, prescription drug, and dental care for retired employees through a single-employer defined benefit medical and dental plan (the Plan). The Plan provides medical and dental benefits for eligible retirees, their spouses and dependents through Gilbert’s group health and dental insurance plans, which cover active and retired members. To be eligible for benefits, the retired employee must retire under one of the state retirement plans for public employees, must have a minimum of ten years of service with Gilbert, and be covered under Gilbert’s medical plan during their active status. Plan benefits and coverage levels are reviewed annually by Town staff and the Board of Trustees for recommendation to and approval from Town Council. The Board of Trustees makes corresponding premium recommendations to the Town Council based on revenues needed to cover the projected cost to operate the plan which are subject to approval by the Town Council. As of June 30, 2019, there are 59 retirees that are currently receiving medical and/or dental benefits. 80 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Contributions – Gilbert requires retirees to pay 120% of the full blended contribution rate. Gilbert makes no contributions for retirees other than allowing them to participate through Gilbert’s pooled benefits. By providing retirees access to Gilbert’s healthcare plans, Gilbert is in effect providing a subsidy to retirees. This implied subsidy exists because on average, retiree healthcare costs are higher than active employee healthcare costs. Gilbert pays for and reports retiree benefits on a pay-as-you-go basis, which is the practice of paying for these benefits as they become due each year. As of June 30, 2019, retirees contributed $409,900, which was in excess of claims paid by $291,776. Gilbert’s regular insurance providers underwrite the retiree policies. Retirees may not convert the benefit into an in-lieu payment to secure coverage under independent plans. The Plan does not issue a separate financial report. Employees Covered by Benefit Terms – The following employees were covered as of the effective date of the OPEB valuation: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to by not yet receiving benefits Active employees Total 59 1,182 1,241 Total OPEB Liability – The Plan’s total OPEB liability of $412,376 was measured as of June 30, 2019. Actuarial Assumptions and Other Inputs – Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and includes the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit cost between the employer and plan members to that point. The total OPEB liability in the June 30, 2019 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Measurement date Actuarial valuation date Interest rate Inflation rate Projected salary increases Health care cost trend rate: Medical and prescription drug Retiree contribution increase ASRS subsidy increases Cost of living adjustments June 30, 2019 June 30, 2019 3.13% 3.00% 3.00% 6.50% graded down to an ultimate rate of 5.00% over 5 years Consistent with medical/drug trends None N/A The discount rate was based on the Fidelity General Obligation AA 20-year yield as of the measurement date. Mortality rates for active employees were based on the PubG.H-2010 (general employees) and PubS.H-2010 (public safety) Employee mortality table, Generational with Projection Scale MP-2018 for males/females. Mortality rates for retirees were based on the PubG.H-2010 (current retirees and general employees) PubS.H2010 (public safety) Healthy Annuitant mortality table, Generational with Projection Scale MP-2018 for males/females. 81 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Changes in the Total OPEB Liability Balances at June 30, 2018 Changes for the year: Service cost Interest Differences between expected and actual experience Changes in assumptions/inputs Benefit payments Net changes Balances at June 30, 2019 $ 1,597,293 $ 87,269 54,575 (1,604,373) 159,488 118,124 (1,184,917) 412,376 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate – The following presents the total OPEB liability of the Plan, as well as what the Plan’s total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate: 1% Decrease Total OPEB Liability $ 527,025 Current Discount Rate $ 412,376 1% Increase $ 316,334 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates – The following presents the total OPEB liability of the Plan, as well as what the Plan’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 percentage point lower or 1 percentage point higher than the current rate: 1% Decrease Total OPEB Liability $ 291,340 Current Discount Rate $ 412,376 1% Increase $ 566,729 OPEB Expense and Deferred Outflows/Inflows of Resource Related to OPEB – For the year ended June 30, 2019, the Plan recognized OPEB expense of $37,233. At June 30, 2019, the Plan reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Changes between expected and actual experience Changes in assumptions or other inputs Total $ $ 82 983,073 983,073 Deferred Inflows of Resources $ $ 2,301,572 2,301,572 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 The amounts reported as deferred outflows of resources and inflows of resources will be recognized in pension expense as follows: Year Ending June 30 2020 2021 2022 2023 2024 Thereafter $ Amount (222,417) (222,417) (222,417) (222,417) (222,417) (206,412) Note 13 - Capital Contributions During the year ended June 30, 2019, the enterprise funds external capital contributions consisted of the following: Environmental Water Wastewater Services Total Contributions from developers $ 5,708,331 $ 2,010,369 $ 575,220 $ 8,293,920 Development fees 12,552,947 5,647,165 18,200,112 Total $ 18,261,278 $ 7,657,534 $ 575,220 $ 26,494,032 Note 14 – Interfund Transfers As of June 30, 2019, interfund transfers were as follows: Transfers In Governmental funds: General Streets Special Revenue General Debt Service Streets and Traffic Capital Projects Parks Capital Projects Municipal Facilities Capital Projects Other Governmental Funds Total governmental funds Enterprise funds: Water Wastewater Environmental Services Total enterprise funds $ 1,190,910 20,205,988 6,848,246 12,080,828 7,740,960 15,018,826 63,085,758 $ 47,626,264 754,300 3,708,651 4,941,482 5,826,574 466,853 63,324,124 $ 484,207 1,199,293 1,683,500 $ 1,276,830 161,222 3,716 1,441,768 $ 3,366 3,366 $ 64,769,258 Internal service funds: Equipment Maintenance Total internal service funds $ Total transfers $ 83 Transfers Out 64,769,258 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 The interfund transfers generally fall within one of the following categories: 1) subsidy transfers; 2) transfers to cover debt service payments; 3) transfers to fund capital project costs; or 4) transfers to fund capital replacement. There were no significant transfers during fiscal year 2019 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. Note 15 - Individual Fund Disclosures Individual funds with deficiencies in fund balance/net position at June 30, 2019, were as follows: Governmental funds Municipal Facilities Capital Projects Other Capital Projects $12,099,209 1,527,983 The deficiency in the Municipal Facilities Capital Projects Fund, a major governmental fund, is due to an advance made by the General Fund to pay for certain capital improvement projects. Future system development fee revenue is expected to eliminate the deficiency. The deficiency in the Other Capital Projects Fund, a non-major governmental fund, is due to the timing of construction related payments and the transfers that fund the transfers. The fund’s deficit is expected to be eliminated in the subsequent fiscal year. Internal service funds Equipment Maintenance $ 1,077,994 The deficiency in the Equipment Maintenance Fund is due to the net pension liability. Note 16 – Contingent Liabilities Gilbert is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of Gilbert’s legal counsel, the resolution of these matters will not have a material adverse effect on the financial condition of Gilbert. Note 17 – Pledged Revenues Gilbert has pledged future water system development fees revenue and future water and wastewater revenues, net of specified operating expenses, to repay $153,400,000 in utility system revenue bonds and revenue refunding bonds issued since 2016. Proceeds from the utility system revenue bonds provided financing for water and wastewater system improvements, and the proceeds from the revenue refunding bonds were used to advance refund $75,326,000 of outstanding 2007 utility system revenue bonds. The bonds are payable from water and wastewater system development fees revenue and water and wastewater net revenues and are payable through 2036. Annual principal and interest payments on the bonds are expected to require less than 31 percent of revenue. The total principal and interest remaining to be paid on the bonds is $177,107,263. Principal and interest paid for the current year was $13,432,163. Total water and wastewater system development fees revenue was $14,623,811 and water and wastewater net revenues were $29,779,111. 84 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 Gilbert has pledged future excise taxes and state-shared revenues to repay $179,170,000 in public facilities municipal property corporation (MPC) revenue bonds issued since 2009, $80,585,000 in public facilities MPC revenue bonds issued in 2009, $20,980,000 in public facilities MPC revenue refunding bonds issued in 2011, $28,080,000 in public facilities MPC revenue refunding bonds issued in 2014, $43,075,000 in public facilities MPC revenue refunding bonds in 2017, and $6,450,000 in public facilities MPC revenue bonds issued in 2017. Proceeds from the bonds provided financing of the multipurpose public safety complex, the service center facility, a police property facility, a sports complex, various other parks and recreation facilities, a parking facility, and a fire and rescue station. Proceeds from the 2011 refunding bonds were used to advance refund $21,670,000 of outstanding 2001 public facilities MPC revenue bonds. Proceeds from the 2014 refunding bonds were used to advance refund $30,205,000 of outstanding 2006 public facilities MPC revenue bonds. Proceeds from the 2017 refunding bonds were used to advance refund $56,845,000 of outstanding 2009 public facilities MPC revenue bonds. The bonds are payable through 2028. In addition, Gilbert has pledged future excise taxes and state-shared revenues to repay $36,980,000 in revenue obligations issued in 2015. Proceeds from the obligations provided financing to design and construct a four-story building for educational purposes. Annual principal and interest payments on the bonds and obligations are expected to require less than 11 percent of excise taxes and state-shared revenues. The total principal and interest remaining to be paid on the bonds and obligations is $133,506,256. Principal and interest paid for the current year was $17,958,731, and the total excise taxes and state-shared revenues were $170,885,312. Note 18 - Investment in Joint Venture Construction of a joint water reclamation plant with the City of Mesa and the Town of Queen Creek was completed during fiscal year 2007. Mesa is the lead agent and is responsible for the operation and maintenance of the plant. Gilbert, in joint effort with Mesa and Queen Creek, is designing improvements as part of the Phase III Expansion for the Greenfield Water Reclamation Plant (GWRP) located on the northwest corner of Greenfield and Queen Creek Roads. The project includes process improvements and upgrades to increase the plant’s capacity from 16 million gallons per day (mgd) to 30 mgd, as well as maintenance and improvements to the existing infrastructure of the plant. Mesa, Gilbert and Queen Creek participate in ownership of the plant and are charged for operating expenses based on gallons of flow. Gilbert’s investment in joint venture is reflected as a separate line item in the proprietary funds financial statements. Separate financial statements for the joint venture are not prepared. Total investment (net of depreciation) as of June 30, 2019, was: Mesa's share Gilbert's share Queen Creek's share Total $ 122,737,361 85,639,273 30,124,470 $ 238,501,104 Construction for the Phase I of a joint water treatment plant with the City of Chandler was completed in fiscal year 2009 and construction for Phase II was completed in fiscal year 2018. Phase I of the plant treats 12 million gallons per day each for Gilbert and Chandler. Phase II of the plant added an additional 12 million gallons per day each for Gilbert and Chandler. Gilbert’s investment in joint venture is reflected as a separate line item in the proprietary funds financial statements. Separate financial statements for the joint venture are not prepared. Total investment (net of depreciation) as of June 30, 2019, was: Gilbert's share Chandler's share Total $ 89,551,861 81,541,088 $ 171,092,949 85 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 In August 2008, Gilbert entered into an Intergovernmental Agreement with the Cities of Mesa and Apache Junction, Superstition Fire & Medical (F&M), and the Town of Queen Creek (the Parties) to plan, design, construct, operate, maintain and finance the TOPAZ Regional Wireless Cooperative Network (Trunked Open Arizona Network – 700/800 MHz Network procured and built by the City of Mesa). On May 1, 2012 and October 26, 2015, Rio Verde Fire District and Fort McDowell Yavapai Nation, respectively, joined TOPAZ. The City of Mesa acts as the lead agency and is responsible for the planning, budgeting, construction, operation and maintenance of the network, in addition to providing all management personnel and financing arrangements. The Parties participate in ownership of the network and are charged for operating and capital expenses based on a six-month rolling average of airtime. Gilbert’s investment in joint venture is reflected within the governmental activities in the government-wide statement of net position. Separate financial statements are not prepared. Total investment (net of depreciation) as of June 30, 2019, was: Mesa's share Gilbert's share Apache Junction's share Superstition F&M's share Queen Creek's share Rio Verde FD's share Fort McDowell's share Total $ $ 6,814,651 1,718,277 595,550 168,249 112,350 13,016 44,514 9,466,607 Note 19 – Tax Abatements Gilbert has made a commitment as part of our economic development program to reimburse certain public improvement costs through transaction privilege taxes generated out of the respective development area. Additional information regarding this agreement may only be disclosed when a sufficient number of participants can be aggregated together. Gilbert has an insufficient number of participants within the development area to authorize such disclosure, as detailed information on such commitments is prohibited from disclosure under Arizona Revised Statute 42-2002 Disclosure of Confidential Information Prohibited. 86 TABLE OF CONTENTS REQUIRED SUPPLEMENTARY INFORMATION 87 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2019 Schedule of the Proportionate Share of the Net Pension Liability Arizona State Retirement System Fiscal Year Proportion of the net pension liability Proportionate share of the net pension liability Covered payroll (1) Proportionate share of the net pension liability as a percentage of covered payroll Plan fiduciary net position as a percentage of the total pension liability 2019 2018 2017 2016 2015 2014 through 2010 0.49% $ 69,364,217 49,511,839 0.49% $ 76,832,504 48,187,902 0.49% $ 78,813,297 45,764,166 0.49% $ 75,695,863 43,765,044 0.47% $ 69,412,268 42,295,765 Information not available (2) 140% 159% 172% 172% 164% 73.40% 69.92% 67.06% 68.35% 69.49% (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2019, the measurement date of the net pension liability is June 30, 2018. See Note 11. (2) The pension schedules in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. 88 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2019 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System – Police Fiscal Year Total pension liability: Service cost Interest on the total pension liability Changes in benefit terms Differences between expected and actual experience in the measurement of the total pension liability Changes in assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) 2019 2018 2017 2016 2015 $ 4,056,282 9,457,916 - $ 4,361,408 8,535,995 1,136,619 $ 3,466,239 7,222,969 9,149,421 $ 3,570,214 6,604,564 - $ 3,293,404 5,414,469 605,849 847,849 - 928,575 3,680,906 547,040 4,549,861 713,111 - 2,479,128 5,473,070 (5,340,286) 9,021,761 128,451,673 137,473,434 (3,648,774) 14,994,729 113,456,944 128,451,673 (3,515,621) 21,419,909 92,037,035 113,456,944 (2,400,631) 8,487,258 83,549,777 92,037,035 (2,087,138) 15,178,782 68,370,995 83,549,777 Plan fiduciary net position: Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) $ 7,551,083 1,973,907 6,242,434 $ 12,682,256 2,271,326 8,763,809 $ 4,426,923 2,243,118 365,916 $ 3,280,061 2,107,439 2,037,534 $ 3,103,356 2,088,159 6,306,779 (5,340,286) (95,708) 106,036 10,437,466 82,751,541 $ 93,189,007 (3,648,774) (77,945) 153,768 20,144,440 62,607,101 $ 82,751,541 (3,515,621) (53,053) 113,260 3,580,543 59,026,558 $ 62,607,101 (2,400,631) (50,099) 75,447 5,049,751 53,976,807 $ 59,026,558 (2,087,138) (50,793) 49,298 9,409,661 44,567,146 $ 53,976,807 Net pension liability - ending (a) - (b) $ 44,284,427 $ 45,700,132 $ 50,849,843 $ 33,010,477 $ 29,572,970 67.79% 64.42% 55.18% 64.13% 64.60% $ 18,572,542 $ 18,694,661 $ 19,247,567 $ 19,071,843 $ 18,990,156 238.44% 244.46% 264.19% 173.08% 155.73% Plan fiduciary net position as a percentage of the total pension liability Covered payroll (1) Gilbert's net pension liability as a percentage of covered payroll 2014 through 2010 Information not available (2) (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2019, the measurement date of the net pension liability is June 30, 2018. See Note 11. (2) The pension schedules in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. 89 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2019 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System – Fire Fiscal Year Total pension liability: Service cost Interest on the total pension liability Changes in benefit terms Differences between expected and actual experience in the measurement of the total pension liability Changes in assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan fiduciary net position: Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll (1) Gilbert's net pension liability as a percentage of covered payroll 2019 2018 2017 2016 2015 $ 3,661,929 6,428,184 - $ 3,652,130 5,586,910 434,841 $ 2,728,554 4,550,994 7,610,545 $ 2,785,128 4,138,400 - $ 2,545,607 3,408,433 (131,651) (1,694,618) - 3,761,967 444,609 (1,091,858) 3,069,903 (1,235,512) - 2,247,902 1,333,403 (1,925,561) 6,469,934 85,999,161 92,469,095 (1,094,738) 12,785,719 73,213,442 85,999,161 (529,722) 16,338,416 56,875,026 73,213,442 (277,805) 5,410,211 51,464,815 56,875,026 (171,217) 9,232,477 42,232,338 51,464,815 $ 5,035,275 1,365,916 4,953,004 $ 5,192,069 1,860,471 6,959,055 $ 3,183,837 1,792,809 300,260 $ 1,845,382 1,903,578 1,653,304 $ 1,954,145 1,667,772 5,045,090 (1,925,561) (76,084) 7,224 9,359,774 66,311,658 $ 75,671,432 (1,094,738) (61,976) 636 12,855,517 53,456,141 $ 66,311,658 (529,722) (43,606) 96,335 4,799,913 48,656,228 $ 53,456,141 (277,805) (40,728) (229,513) 4,854,218 43,802,010 $ 48,656,228 (171,217) (40,631) 8,455,159 35,346,851 $ 43,802,010 $ 16,797,663 $ 19,687,503 $ 19,757,301 $ 8,218,798 $ 7,662,805 81.83% 77.11% 73.01% 85.55% 85.11% $ 16,176,584 $ 16,132,031 $ 15,444,728 $ 15,274,115 $ 15,508,151 103.84% 122.04% 127.92% 53.81% 49.41% 2014 through 2010 Information not available (2) (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2019, the measurement date of the net pension liability is June 30, 2018. See Note 11. (2) The pension schedules in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. 90 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2019 Schedule of Pension Contributions: Arizona State Retirement System 2019 2018 Fiscal Year 2017 2016 2015 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) $ 5,921,577 $ 5,338,739 $ 5,187,460 $ 5,278,569 $ 5,137,457 Covered payroll Contributions as a percentage of covered payroll $ 52,965,805 $ 49,511,839 $ 48,187,902 $ 45,764,166 $ 43,765,044 11.18% 10.78% 10.77% 11.53% 11.74% Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll $ 5,921,577 - $ 5,338,739 - $ 5,187,460 - $ 5,278,569 - $ 5,137,457 - 2014 2013 Fiscal Year 2012 2011 2010 $ 4,763,978 $ 4,162,425 $ 3,880,631 $ 3,448,898 $ 3,329,705 4,763,978 $ - 4,162,425 $ - 3,880,631 $ - 3,448,898 $ - 3,329,705 $ - $ 42,295,765 $ 38,356,312 $ 36,582,049 $ 37,474,457 $ 37,007,042 11.26% 10.85% 10.61% 9.20% 9.00% 91 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2019 Schedule of Pension Contributions: Public Safety Retirement System – Police Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll 2019 2018 Fiscal Year 2017 2016 2015 $ 6,410,919 $ 6,170,252 $ 4,501,937 $ 4,021,770 $ 3,414,607 11,245,894 $ (4,834,975) 7,330,436 $ (1,160,184) 12,700,837 $ (8,198,900) $ $ 20,212,530 $ 18,572,542 $ 18,694,661 $ 19,247,567 $ 19,071,843 55.64% 39.47% 67.94% 23.12% 17.90% 4,449,337 (427,567) $ 3,414,607 - 2014 2013 Fiscal Year 2012 2011 2010 $ 3,231,755 $ 2,930,117 $ 2,384,390 $ 2,239,987 $ 2,330,954 $ 3,231,755 - $ 2,930,117 - $ 2,384,390 - $ 2,239,987 - $ 2,330,954 - $ 18,990,156 $ 17,477,557 $ 16,492,849 $ 16,550,117 $ 16,686,272 17.02% 16.77% 14.46% 13.53% 13.97% Public Safety Retirement System – Fire Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll 2019 2018 Fiscal Year 2017 2016 2015 $ 4,009,743 $ 4,644,867 $ 3,266,367 $ 2,241,688 $ 1,982,159 7,556,014 $ (3,546,271) $ 5,096,285 (451,418) 5,307,483 $ (2,041,116) $ $ 16,590,770 $ 16,176,854 $ 16,132,031 $ 15,444,728 $ 15,274,115 45.54% 31.50% 32.90% 20.00% 12.98% 3,088,477 (846,789) $ 1,982,159 - 2014 2013 Fiscal Year 2012 2011 2010 $ 2,037,266 $ 1,793,907 $ 1,479,746 $ 1,422,964 $ 1,446,837 $ 2,037,266 - $ 1,793,907 - $ 1,479,746 - $ 1,422,964 - $ 1,446,837 - $ 15,508,151 $ 13,954,822 $ 13,335,971 $ 13,220,688 $ 12,186,063 13.14% 12.86% 11.10% 10.76% 11.87% 92 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2019 Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios: Town of Gilbert Defined Benefit Plan Fiscal Year 2019 Total OPEB liability: Service cost Interest on the total OPEB liability Differences between expected and actual experience in the measurement of the total OPEB liability Changes in assumptions/inputs Benefit payments, including refunds of employee contributions Net change in total OPEB liability Total OPEB liability - beginning Total OPEB liability - ending (a) Covered payroll (1) $ 87,269 54,575 2017 through 2010 2018 $ 84,727 58,026 (1,604,373) 159,488 (1,296,953) 1,184,917 118,124 (1,184,917) 1,597,293 $ 412,376 $ 96,758 127,475 1,469,818 1,597,293 $ 86,050,638 $ 83,544,308 Gilbert's total OPEB liability as a percentage of covered payroll 0.5% Information not available (2) 1.9% (1) The covered payroll amount will be as of the measurement date of the total OPEB liability. For fiscal year 2019, the measurement date of the total OPEB liability is June 30, 2019. See also Note 12. (2) The OPEB schedule in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. (3) No assets are accumulated in a trust that meets the criteria of a trust as defined in GASB Statement No. 75, Accounting and Reporting for Postemployment Benefits Other than Pensions, to pay for the related benefits of this plan. 93 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2019 Notes to Pension Plan Schedules Note 1 - Actuarially Determined Contribution Rates Actuarial determined contribution rates for the Public Safety Personnel Retirement System are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: Actuarial cost method Amortization method Remaining amortization period as of the 2017 actuarial valuation Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Wage growth Retirement age Mortality Entry age normal Level percent of pay, closed 19 years 7-year smoothed market value, 80%/120% market corridor PSPRS members with initial membership date before July 1, 2017: In the 2017 actuarial valuation, the investment rate of return was decreased from 7.5% to 7.4%. In the 2016 actuarial valuation, the investment rate of return was decreased from 7.85% to 7.5%. In the 2013 actuarial valuation, the investment rate of return was decreased from 8.0% to 7.85%. PSPRS members with initial membership on or after July 1, 2017: 7.0%. In the 2017 actuarial valuation, projected salary increased were decreased from 4.0%-8.0% to 3.5%-7.5%. In the 2014 actuarial valuation, projected salary increases were decreased from 4.5%-8.5% to 4.0%-8.0%. In the 2013 actuarial valuation, projected salary increases were decreased from 5.0%-9.0% to 4.5%-8.5%. In the 2017 actuarial valuation, wage growth was decreased from 4.0% to 3.5%. In the 2014 actuarial valuation, wage growth was decreased from 4.5% to 4.0%. In the 2013 actuarial valuation, wage growth was decreased from 5.0% to 4.5%. Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to the experience study of the period July 1, 2006 – June 30, 2011. In the 2017 actuarial valuation, changed to RP-2014 tables, with 75% of MP-2016 fully generational projection scales. RP-2000 mortality table (adjusted by 105% for both males and females). Note 2 – Factors That Affect Trends Arizona courts have ruled that provisions of a 2011 law that changed the mechanism for funding permanent pension benefit increases and increased employee pension contribution rates were unconstitutional or a breach of contract because those provisions apply to individuals who were members as of the law’s effective date. As a result, the PSPRS and EORP changed benefit terms to reflect the prior mechanism for funding permanent benefit increases for those members and revised actuarial assumptions to explicitly value future permanent benefit increases. PSPRS and EORP also reduced those members’ employee contribution rates. These changes are reflected in the plans’ pension liabilities for fiscal year 2015 (measurement date 2014) for members who were retired as of the law’s effective date and fiscal year 2018 (measurement date 2017) for members who retired or will retire after the law’s effective date. These changes also increased the PSPRS required pension contributions beginning in fiscal year 2016 for members who were retired as of the law’s effective date. These changes increased the PSPRS required contributions beginning in fiscal year 2019 for members who retired or will retire after the law’s effective date. 94 TABLE OF CONTENTS NONMAJOR FUNDS OTHER GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for revenues and expenditures from specific taxes or other earmarked sources. Such funds are usually required by statute or ordinance to finance particular functions or activities. Grants - accounts for miscellaneous grants received from Federal, State and local governments that require segregation of revenues and expenditures. Special Districts - accounts for taxes received from and expenditures of the street light maintenance improvement districts and parkway maintenance improvement districts. Other Special Revenue - accounts for revenues received from various agencies and sources, including seized funds from law enforcement agencies that are required to be used for specific purposes. Capital Projects Funds Capital Projects Funds are established to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Other Capital Projects - accounts for the design and construction of redevelopment infrastructure and related funding. 95 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Balance Sheet Nonmajor Governmental Funds June 30, 2019 Special Revenue Special Districts Grants Assets Pooled cash and investments Receivables, net: Taxes Accrued interest Accounts Due from other governments Total assets $ 258,958 $ 606,087 Other Special Revenue $ 1,451,094 52 729,209 988,219 19,880 625,967 6,189 6,903 1,002,776 2,466,962 Liabilities Accounts payable Accrued liabilities Due to other funds Unearned revenue Total liabilities 82,927 7,195 471,741 561,863 29,987 8,340 38,327 45,898 21,970 267,601 119,511 454,980 Fund balances (deficits) Restricted Unassigned Total fund balances (deficits) 426,356 426,356 587,640 587,640 2,271,771 (259,789) 2,011,982 $ Total liabilities and fund balances (deficits) 96 988,219 $ 625,967 $ 2,466,962 TABLE OF CONTENTS Capital Projects Other Capital Projects Total Nonmajor Governmental Funds $ $ $ 2,063,407 4,379,546 2,063,407 19,880 6,241 6,903 1,731,985 6,144,555 3,591,390 3,591,390 3,750,202 37,505 739,342 119,511 4,646,560 (1,527,983) (1,527,983) 3,285,767 (1,787,772) 1,497,995 2,063,407 $ 6,144,555 97 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2019 Special Revenue Special Districts Grants Revenues Property taxes Intergovernmental Charges for services Fines and forfeitures Gifts and donations Investment earnings Total revenues $ Expenditures Current: General government: Management and policy Court Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Capital outlay Total expenditures 1,941,638 5,530 1,947,168 $ Other Special Revenue 2,924,018 2,924,018 $ 35,000 867,884 415,564 114,655 77,640 1,510,743 516,419 - - 70,134 393,843 254,680 39,991 887,577 71,330 1,769,997 1,823,259 997,573 2,820,832 771,010 42,667 12,423 49,884 1,339,961 Excess (deficiency) of revenues over (under) expenditures 177,171 103,186 170,782 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) (415,078) (415,078) - 139,494 (30,080) 109,414 Net change in fund balances Fund balances at beginning of year (as restated, see Note 3) Fund balances (deficits) at end of year (237,907) 664,263 426,356 103,186 484,454 587,640 280,196 1,731,786 2,011,982 $ 98 $ $ TABLE OF CONTENTS Capital Projects Total Nonmajor Governmental Funds Other Capital Projects $ $ - $ 2,924,018 1,976,638 867,884 415,564 114,655 83,170 6,381,929 - 586,553 393,843 16,385,620 16,385,620 1,025,690 82,658 1,823,259 1,009,996 887,577 49,884 16,456,950 22,316,410 (16,385,620) (15,934,481) 14,879,332 (21,695) 14,857,637 15,018,826 (466,853) 14,551,973 (1,527,983) (1,527,983) (1,382,508) 2,880,503 $ 1,497,995 99 100 TABLE OF CONTENTS BUDGETARY COMPARISON SCHEDULES 101 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Grants Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues Intergovernmental Investment earnings Total revenues $ 8,271,780 8,271,780 Actual Amounts Final $ 8,271,780 8,271,780 $ 1,941,638 5,530 1,947,168 Variance with Final Budget Positive (Negative) $ (6,330,142) 5,530 (6,324,612) Expenditures Current: General government: Management and policy Court Public safety: Police Fire Parks and recreation Transportation Contingency Capital outlay Total expenditures 806,000 2,100 952,142 2,100 516,419 - 435,723 2,100 141,590 20,000 887,430 5,000,000 6,857,120 324,203 49,904 20,000 1,067,730 4,574,252 38,168 7,028,499 254,680 39,991 887,577 71,330 1,769,997 69,523 9,913 20,000 180,153 4,574,252 (33,162) 5,258,502 Excess (deficiency) of revenues over expenditures 1,414,660 1,243,281 177,171 (1,066,110) Other financing uses Transfers out Total other financing uses (1,756,270) (1,756,270) (2,056,270) (2,056,270) (415,078) (415,078) 1,641,192 1,641,192 (812,989) (237,907) Net change in fund balances $ Fund balances at beginning of year (as restated, see Note 3) Fund balances at end of year (341,610) $ $ 102 664,263 426,356 $ 575,082 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Special Districts Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues Property taxes Total revenues $ 2,918,230 2,918,230 Final $ 2,918,230 2,918,230 Actual Amounts $ 2,924,018 2,924,018 Variance with Final Budget Positive (Negative) $ 5,788 5,788 Expenditures Current: Highways and streets Parks and recreation Total expenditures 2,029,600 1,168,300 3,197,900 2,029,600 1,168,300 3,197,900 1,823,259 997,573 2,820,832 206,341 170,727 377,068 Excess (deficiency) of revenues over (under) expenditures (279,670) (279,670) 103,186 382,856 (279,670) 103,186 Net change in fund balances $ Fund balances at beginning of year (as restated, see Note 3) Fund balances at end of year (279,670) $ $ 103 484,454 587,640 $ 382,856 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Other Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues Intergovernmental Charges for services Fines and forfeitures Gifts and donations Investment earnings Total revenues $ 35,000 1,480,730 484,000 116,390 2,116,120 Final $ 35,000 1,480,730 484,000 116,390 2,116,120 Actual Amounts $ 35,000 867,884 415,564 114,655 77,640 1,510,743 Variance with Final Budget Positive (Negative) $ (612,846) (68,436) (1,735) 77,640 (605,377) Expenditures Current: General government: Management and policy Court Public safety: Police Fire Parks and recreation Non departmental Total expenditures 134,460 571,270 134,460 581,120 70,134 393,843 64,326 187,277 1,801,660 112,150 25,000 49,890 2,694,430 1,970,270 112,150 25,000 49,890 2,872,890 771,010 42,667 12,423 49,884 1,339,961 1,199,260 69,483 12,577 6 1,532,929 Excess (deficiency) of revenues over (under) expenditures (578,310) (756,770) 170,782 927,552 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) (95,000) (95,000) 439,500 (95,040) 344,460 139,494 (30,080) 109,414 (300,006) 64,960 (235,046) Net change in fund balances $ Fund balances at beginning of year (as restated, see Note 3) Fund balances at end of year (673,310) $ (412,310) 280,196 $ 104 1,731,786 2,011,982 $ 692,506 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Other Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Variance with Final Budget Positive (Negative) Budgeted Amounts Original Revenues Total revenues $ Actual Amounts Final - $ - $ - $ - Expenditures Capital outlay Contingency Total expenditures 24,939,840 24,939,840 18,515,575 6,877,454 25,393,029 16,385,620 16,385,620 2,129,955 6,877,454 9,007,409 Excess (deficiency) of revenues over (under) expenditures (24,939,840) (25,393,029) (16,385,620) 9,007,409 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 24,939,840 24,939,840 24,939,840 24,939,840 14,879,332 (21,695) 14,857,637 (10,060,508) (21,695) (10,082,203) (453,189) (1,527,983) Net change in fund balances $ - Fund balances at beginning of year Fund balances at end of year $ $ 105 (1,527,983) $ (1,074,794) TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA General Debt Service Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues Property taxes Investment earnings Total revenues $ 23,250,000 100,000 23,350,000 Final $ 23,250,000 100,000 23,350,000 Actual $ 22,295,654 414,532 22,710,186 Variance with Final Budget Positive (Negative) $ (954,346) 314,532 (639,814) Expenditures Debt service: Principal Interest Fiscal and other charges Total expenditures 32,640,000 12,008,040 44,500 44,692,540 33,640,000 11,008,040 46,750 44,694,790 33,640,000 10,978,031 22,551 44,640,582 30,009 24,199 54,208 Deficiency of revenues under expenditures (21,342,540) (21,344,790) (21,930,396) (585,606) Other financing sources Transfers in Total other financing sources 21,536,930 21,536,930 21,912,640 21,912,640 20,205,988 20,205,988 (1,706,652) (1,706,652) 567,850 (1,724,408) Net change in fund balances Fund balances at beginning of year Fund balances at end of year $ 194,390 $ $ 106 6,020,480 4,296,072 $ (2,292,258) TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Special Assessments Debt Service Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues Special assessments Charges for services Investment earnings Total revenues $ 6,411,280 6,411,280 Expenditures Debt service: Principal Interest Fiscal and other charges Total expenditures $ 6,411,280 6,411,280 Actual $ 818,092 3,620 3,444 825,156 $ (5,593,188) 3,620 3,444 (5,586,124) 6,105,000 281,280 25,000 6,411,280 6,105,000 281,280 26,000 6,412,280 550,000 264,095 12,125 826,220 5,555,000 17,185 13,875 5,586,060 - (1,000) (1,064) (64) (1,000) (1,064) $ (11,172,184) Deficiency of revenues under expenditures Net change in fund balances Fund balances at beginning of year Fund balances at end of year Final Variance with Final Budget Positive (Negative) $ - $ $ 107 75,459 74,395 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Streets and Traffic Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues Intergovernmental System development fees Investment earnings Miscellaneous Total revenues $ 15,809,740 2,000,000 15,000 17,824,740 Final $ 15,809,740 2,000,000 15,000 17,824,740 Actual $ Variance with Final Budget Positive (Negative) 574,383 2,239,233 3,002,677 20,488 5,836,781 $ (15,235,357) 239,233 2,987,677 20,488 (11,987,959) Expenditures Current: Highways and streets Non departmental Capital outlay Contingency Total expenditures 140,270 4,400 233,495,240 233,639,910 24,828 5,385 183,321,899 24,212,264 207,564,376 905 20,077,548 20,078,453 24,828 4,480 163,244,351 24,212,264 187,485,923 Deficiency of revenues under expenditures (215,815,170) (189,739,636) (14,241,672) 175,497,964 Other financing source (uses) General obligation bonds issued Transfers in Transfers out Total other financing sources (uses) 100,000,000 27,330,970 (70,621,370) 56,709,600 100,000,000 27,330,970 (70,621,370) 56,709,600 6,848,246 (3,708,651) 3,139,595 (100,000,000) (20,482,724) 66,912,719 (53,570,005) $ (159,105,570) $ (133,030,036) (11,102,077) $ 121,927,959 Net change in fund balances Fund balances at beginning of year (as restated, see Note 3) Fund balances at end of year $ 108 86,099,998 74,997,921 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Parks Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues System development fees Investment earnings Total revenues $ 7,000,000 65,000 7,065,000 Final $ 7,000,000 65,000 7,065,000 Actual $ 9,632,004 1,100,228 10,732,232 Variance with Final Budget Positive (Negative) $ 2,632,004 1,035,228 3,667,232 Expenditures Current: Parks and recreation Non departmental Capital outlay Contingency Total expenditures 11,544,290 4,400 43,826,220 55,374,910 11,013,676 12,253 40,693,293 7,042,101 58,761,323 10,644,615 7,215 20,936,944 31,588,774 369,061 5,038 19,756,349 7,042,101 27,172,549 Deficiency of revenues under expenditures (48,309,910) (51,696,323) (20,856,542) 30,839,781 Other financing sources (uses) Proceeds from the sale of capital assets Transfers in Transfers out Total other financing sources (uses) 24,000,000 55,370,510 (43,317,360) 36,053,150 24,000,000 55,370,510 (43,323,480) 36,047,030 12,080,828 (4,941,482) 7,139,346 (24,000,000) (43,289,682) 38,381,998 (28,907,684) $ (12,256,760) $ (15,649,293) (13,717,196) Net change in fund balances Fund balances at beginning of year (as restated, see Note 3) Fund balances - ending $ 109 30,415,320 16,698,124 $ 1,932,097 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Municipal Facilities Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Revenues System development fees Investment earnings Total revenues $ 8,000,000 8,000,000 Final $ 8,000,000 8,000,000 Actual $ 10,095,197 191,825 10,287,022 Variance with Final Budget Positive (Negative) $ 2,095,197 191,825 2,287,022 Expenditures Current: Public safety: Police Non departmental Capital outlay Contingency Total expenditures 371,360 200,200 17,419,460 17,991,020 371,360 705,325 17,592,207 4,181,258 22,850,150 259,105 282,781 9,667,150 10,209,036 112,255 422,544 7,925,057 4,181,258 12,641,114 Excess (deficiency) of revenues over (under) expenditures (9,991,020) (14,850,150) 77,986 14,928,136 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 16,832,760 (5,915,030) 10,917,730 16,832,760 (6,066,660) 10,766,100 7,740,960 (5,826,574) 1,914,386 (9,091,800) 240,086 (8,851,714) Net change in fund balances Fund balances at beginning of year (as restated, see Note 3) Fund balances - ending $ 926,710 $ (4,084,050) 1,992,372 $ 110 (14,091,581) (12,099,209) $ 6,076,422 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Water Enterprise Fund Statement of Revenues, Expenditures, and Changes in Net Position Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Final Actual Amounts Variance with Final Budget Positive (Negative) 46,185,000 175,000 46,360,000 $ $ Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Personnel services Operation and maintenance Capital outlay Allocation of indirect expenses Debt service: Principal Contingency Total operating expenses Operating loss Nonoperating revenues (expenses) Intergovernmental Interest expense Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) Loss before contributions and transfers Capital contributions Transfers in Transfers out Change in net position 46,185,000 175,000 46,360,000 45,508,286 260,277 45,768,563 (676,714) 85,277 (591,437) 2,524,210 9,617,420 18,241,240 131,813,870 2,079,340 2,161,662 9,619,920 18,977,498 117,867,301 2,079,340 1,387,515 9,676,591 16,937,248 47,943,372 2,079,340 774,147 (56,671) 2,040,250 69,923,929 - 5,285,000 1,801,220 171,362,300 5,285,000 38,466,406 194,457,127 5,285,000 83,309,066 38,466,406 111,148,061 (125,002,300) (148,097,127) (37,540,503) 110,556,624 4,954,000 (4,709,630) 620,000 864,370 4,954,000 (4,709,630) 620,000 864,370 1,719,627 (3,558,897) 5,664,806 30,657 3,856,193 (3,234,373) 1,150,733 5,044,806 30,657 2,991,823 (124,137,930) (147,232,757) (33,684,310) 113,548,447 12,100,000 950,980 (4,714,700) 12,100,000 950,980 (4,994,000) 12,552,947 484,207 (1,276,830) 452,947 (466,773) 3,717,170 $ (115,801,650) $ (139,175,777) (21,923,986) $ 117,251,791 Explanation of difference between budgetary change in net position at June 30, 2019, and GAAP change in net position: Obligations for compensated absenses, post-employment benefits, and net pension liability are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences 6/30/18 Less compensated absences 6/30/19 Add post-employment benefits 6/30/18 Less post-employment benefits 6/30/19 Add net pension liability 6/30/18 Less net pension liability 6/30/19 Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. Debt service principal payments are not recognized as expenses on the GAAP basis but are recognized as expenses on the budget basis. Capital assets contributed by developers are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis. Depreciation is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. Change in net position as reported on the statement of revenues, expenses and changes in fund net position 111 $ 1,317,261 (1,118,128) 144,091 (51,142) 10,437,855 (9,534,793) 47,943,372 5,285,000 5,708,331 (14,958,540) $ 23,249,321 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Wastewater Enterprise Fund Statement of Revenues, Expenditures, and Changes in Net Position Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Final Actual Amounts Variance with Final Budget Positive (Negative) 28,310,000 28,310,000 $ $ Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ 28,310,000 28,310,000 $ 28,686,043 11,205 28,697,248 376,043 11,205 387,248 Operating expenses General and administrative Personnel services Operation and maintenance Capital outlay Allocation of indirect expenses Debt service: Principal Contingency Total operating expenses 5,464,310 4,321,270 7,370,390 121,892,040 1,011,350 1,732,569 4,328,430 11,627,799 110,937,586 1,011,350 768,218 4,215,252 10,611,568 38,718,612 1,011,350 964,351 113,178 1,016,231 72,218,974 - 1,990,000 2,365,830 144,415,190 1,940,000 12,147,258 143,724,992 1,940,000 57,265,000 12,147,258 86,459,992 Operating loss (116,105,190) (115,414,992) (28,567,752) 86,847,240 (1,624,400) 222,000 (1,402,400) (1,687,400) 222,000 (1,465,400) (1,337,525) 4,995,765 12,025 3,670,265 349,875 4,773,765 12,025 5,135,665 (117,507,590) (116,880,392) (24,897,487) 91,982,905 6,150,000 3,713,930 (1,529,920) 6,150,000 3,993,230 (1,566,420) 5,647,165 1,199,293 (161,222) (502,835) (2,793,937) 1,405,198 $ (109,173,580) $ (108,303,582) $ (18,212,251) Nonoperating revenues (expenses) Interest expense Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) Loss before contributions and transfers Capital contributions Transfers in Transfers out Change in net position Explanation of difference between budgetary change in net position at June 30, 2019, and GAAP change in net position: Obligations for compensated absenses, post-employment benefits, and net pension liability are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences 6/30/18 Less compensated absences 6/30/19 Add post-employment benefits 6/30/18 Less post-employment benefits 6/30/19 Add net pension liability 6/30/18 Less net pension liability 6/30/19 Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. Debt service principal payments are not recognized as expenses on the GAAP basis but are recognized as expenses on the budget basis. Capital assets contributed by developers are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis. Depreciation is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. Change in net position as reported on the statement of revenues, expenses and changes in fund net position 112 574,341 (572,723) 47,897 (17,237) 3,853,672 (3,080,712) 38,718,612 1,940,000 2,010,369 (10,787,106) $ 14,474,862 $ 90,091,331 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Environmental Services Enterprise Fund Statement of Revenues, Expenditures, and Changes in Net Position Budget and Actual - Budgetary Basis For the Year Ended June 30, 2019 Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Final 17,318,000 2,676,000 19,994,000 $ Actual 17,318,000 2,676,000 19,994,000 $ 20,632,800 94,339 20,727,139 Variance with Final Budget Positive (Negative) $ 3,314,800 (2,581,661) 733,139 Operating expenses General and administrative Personnel services Operation and maintenance Capital outlay Allocation of indirect expenses Contingency Total operating expenses 884,800 7,983,340 7,369,470 7,324,320 1,004,610 2,059,300 26,625,840 1,065,810 7,925,140 8,188,187 7,308,022 1,004,610 1,070,180 26,561,949 1,368,992 7,805,758 7,907,920 4,309,900 1,004,610 22,397,180 (303,182) 119,382 280,267 2,998,122 1,070,180 4,164,769 Operating loss (6,631,840) (6,567,949) (1,670,041) 4,897,908 150,000 150,000 300,000 150,000 150,000 300,000 537,673 833,171 140,396 1,511,240 537,673 683,171 (9,604) 1,211,240 (6,331,840) (6,267,949) (158,801) 6,109,148 - - (3,716) (3,716) (6,267,949) (162,517) Nonoperating revenues Intergovernmental Investment earnings Gain on sale of capital assets Total nonoperating revenues Loss before contributions and transfers Transfers out $ Change in net position (6,331,840) Explanation of difference between budgetary change in net position at June 30, 2019, and GAAP change in net position: Obligations for compensated absenses, post-employment benefits, and net pension liability are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences 6/30/18 Less compensated absences 6/30/19 Add post-employment benefits 6/30/18 Less post-employment benefits 6/30/19 Add net pension liability 6/30/18 Less net pension liability 6/30/19 Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. Capital assets contributed by developers are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis. Depreciation is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. Change in net position as reported on the statement of revenues, expenses and changes in fund net position 113 $ 745,844 (715,394) 108,272 (37,269) 6,537,511 (6,148,768) 4,309,900 575,220 (4,305,949) $ 906,850 $ 6,105,432 114 TABLE OF CONTENTS INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the government, on a cost reimbursement basis. Equipment Maintenance - to account for the revenues and expenses from the maintenance of Gilbert's motorized equipment. Employee Benefit Self-Insurance - to account for and finance Gilbert’s uninsured risks of loss for medical and dental claims. 115 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Net Position Internal Service Funds June 30, 2019 Assets Current assets: Pooled cash and investments Receivables (net): Accrued interest Accounts Inventories Total current assets Equipment Maintenance Employee Benefit SelfInsurance $ $ 506,519 Total 8,298,297 $ 8,804,816 2,560 89,066 845,043 1,443,188 33,050 790,500 9,121,847 35,610 879,566 845,043 10,565,035 5,395 - 5,395 59,785 65,180 1,508,368 9,121,847 59,785 65,180 10,630,215 Deferred outflows of resources Pensions and other post-employment benefits Total deferred outflows of resources 349,384 349,384 - 349,384 349,384 Liabilities Current liabilities: Accounts payable Accrued liabilities Current portion of accrued compensated absences Claims payable Total current liabilities 278,189 83,178 78,584 439,951 2,274 1,700,000 1,702,274 280,463 83,178 78,584 1,700,000 2,142,225 Noncurrent liabilities: Long-term portion of compensated absences Other post-employment benefits Net pension liability Total noncurrent liabilities Total liabilities 133,276 15,572 2,044,993 2,193,841 2,633,792 1,702,274 133,276 15,572 2,044,993 2,193,841 4,336,066 Deferred inflows of resources Pensions and other post-employment benefits Total deferred inflows of resources 301,954 301,954 - 301,954 301,954 59,785 (1,137,779) (1,077,994) 7,419,573 7,419,573 59,785 6,281,794 6,341,579 Noncurrent assets: Other post employment benefits Capital assets: Depreciable, net Total noncurrent assets Total assets Net position Net investment in capital assets Unrestricted Total net position $ 116 $ $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Net Position Internal Service Funds For the Year Ended June 30, 2019 Operating revenues Charges for services Other Total operating revenues Equipment Maintenance Employee Benefit SelfInsurance $ $ Operating expenses General and administrative Personnel services Operation and maintenance Claims incurred Depreciation Total operating expenses 7,228,167 23,109 7,251,276 Total 18,676,867 761,660 19,438,527 $ 25,905,034 784,769 26,689,803 74,880 2,092,826 5,037,392 14,626 7,219,724 1,538,830 15,279,349 16,818,179 1,613,710 2,092,826 5,037,392 15,279,349 14,626 24,037,903 Operating income 31,552 2,620,348 2,651,900 Nonoperating revenues Investment earnings Total nonoperating revenues 20,126 20,126 242,746 242,746 262,872 262,872 Transfers out (3,366) - (3,366) Change in net position 48,312 2,863,094 2,911,406 (1,126,306) 4,556,479 3,430,173 Total net position, beginning of year $ Total net position, end of year 117 (1,077,994) $ 7,419,573 $ 6,341,579 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2019 Cash flows from operating activities: Other operating cash receipts Cash receipts from other funds and/or employees for services Cash receipts from customers Cash payments to suppliers for goods and services Cash payments to employees for services Equipment Maintenance Employee Benefit SelfInsurance $ $ Net cash provided (used) by operating activities 23,109 6,722,927 475,992 (5,344,495) (2,067,940) Total 761,660 17,908,174 (16,630,675) - $ 784,769 24,631,101 475,992 (21,975,170) (2,067,940) (190,407) 2,039,159 1,848,752 (3,366) - (3,366) (3,366) - (3,366) 17,566 231,536 249,102 17,566 231,536 249,102 Net increase (decrease) in cash and cash equivalents (176,207) 2,270,695 2,094,488 Cash and cash equivalents at beginning of year 682,726 6,027,602 Cash flows from noncapital financing activities Transfers to other funds Net cash used by noncapital financing activities Cash flows from investing activities Interest received on investments Net cash provided by investing activities Cash and cash equivalents at end of the year 6,710,328 $ 506,519 $ 8,298,297 $ 8,804,816 $ 31,552 $ 2,620,348 $ 2,651,900 Reconciliation of operating income to net cash provided (used) by operating activities: Operating Income Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation Changes in assets and liabilities: Accounts receivable Inventories Deferred outflows of resources Accounts payable Claims payable Accrued expenses Other post-employment benefits Net pension liability Deferred inflows of resources Net cash provided (used) by operating activities 118 $ 14,626 - 14,626 (29,248) (153,892) (88,335) (78,331) (1,311) (18,641) (42,881) 176,054 (190,407) (768,693) 1,504 186,000 2,039,159 (797,941) (153,892) (88,335) (76,827) 186,000 (1,311) (18,641) (42,881) 176,054 1,848,752 $ $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Equipment Maintenance Fund Schedule of Revenues, Expenditures, and Changes in Net Position - Budget and Actual For the Year Ended June 30, 2019 Final Actual Amounts Variance with Final Budget Positive (Negative) 7,236,000 3,000 7,239,000 $ $ Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ 7,236,000 3,000 7,239,000 $ 7,228,167 23,109 7,251,276 (7,833) 20,109 12,276 Operating expenses General and administrative Personnel services Operation and maintenance Capital outlay Contingency Total operating expenses 78,050 2,044,860 5,534,850 200,000 400,000 8,257,760 97,350 2,084,860 5,515,550 200,000 350,711 8,248,471 74,880 2,171,053 5,037,392 7,283,325 22,470 (86,193) 478,158 200,000 350,711 965,146 Operating loss (1,018,760) (1,009,471) (32,049) 977,422 - - 20,126 20,126 20,126 20,126 (1,018,760) (1,009,471) (11,923) 997,548 - - (3,366) (3,366) (1,009,471) (15,289) Nonoperating revenues Investment earnings Total nonoperating revenues Loss before contributions and transfers Transfers out Change in net position $ (1,018,760) Explanation of difference between budgetary change in net position at June 30, 2019, and GAAP change in net position: Obligations for compensated absences, post-employment benefits, and net pension liability are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences 6/30/18 Less compensated absences 6/30/19 Add post-employment benefits 6/30/18 Less post-employment benefits 6/30/19 Add net pension liability 6/30/18 Less net pension liability 6/30/19 Depreciation is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. Change in net position as reported on the statement of revenues, expenses and changes in fund net position 119 $ 228,565 (211,860) 28,818 (10,177) 2,087,874 (2,044,993) (14,626) $ 48,312 $ 994,182 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Employee Benefit Self-Insurance Fund Schedule of Revenues, Expenditures, and Changes in Net Position - Budget and Actual For the Year Ended June 30, 2019 Variance with Budgeted Amounts Original Operating revenues Charges for services Other $ 17,995,000 30,000 Actual Amounts Final $ 17,995,000 30,000 $ 18,676,867 761,660 Final Budget Positive (Negative) $ 681,867 731,660 Total operating revenues 18,025,000 18,025,000 19,438,527 1,413,527 Operating expenses General and administrative Claims incurred Capital outlay 1,598,060 16,760,500 - 1,598,060 16,710,370 50,130 1,538,830 15,279,349 - 59,230 1,431,021 50,130 Total operating expenses 18,358,560 18,358,560 16,818,179 1,540,381 Operating income (loss) (333,560) (333,560) 2,620,348 2,953,908 Nonoperating revenues Investment earnings 32,000 32,000 242,746 210,746 32,000 32,000 242,746 210,746 Total nonoperating revenues $ Change in net position 120 (301,560) $ (301,560) $ 2,863,094 $ 3,164,654 TABLE OF CONTENTS AGENCY FUNDS Agency Funds are used to account for assets held by the government as an agent for individuals, private organizations, other governments and/or other funds. Flexible Spending - accounts for monies received from employees for medical and dependent care expenses under Internal Revenue Code Section 125. Fire Retirement Health - accounts for monies received from sworn fire employees for providing a monthly stipend for retirees to apply to the cost of their medical and/or dental insurance, medical and dental co-pays, and prescriptions and other benefits. 121 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Changes in Assets and Liabilities Agency Funds Year Ended June 30, 2019 Flexible Spending Beginning Balance Additions Assets Restricted cash and investments Prepaid items $ 23,484 6,062 $ Total assets $ 29,546 Liabilities Dependent care benefits payable $ Total liabilities 515,030 521,672 Ending Balance Deductions $ 518,580 511,101 $ 19,934 16,633 $ 1,036,702 $ 1,029,681 $ 36,567 29,546 $ 118,087 $ 111,066 $ 36,567 $ 29,546 $ 118,087 $ 111,066 $ 36,567 Assets Restricted cash and investments $ - $ 64,825 $ 64,825 $ - Total assets $ - $ 64,825 $ 64,825 $ - $ - $ 44,525 67,325 $ 44,525 67,325 $ - $ - $ 111,850 $ 111,850 $ - Assets Restricted cash and investments Prepaid items $ 23,484 6,062 $ 579,855 521,672 $ 583,405 511,101 $ 19,934 16,633 Total assets $ 29,546 $ 1,101,527 $ 1,094,506 $ 36,567 $ 29,546 $ 44,525 67,325 118,087 $ 44,525 67,325 111,066 $ 36,567 29,546 $ 229,937 $ 222,916 $ 36,567 Fire Retirement Health Fund Liabilities Accounts payable Other deposits Total liabilities Total-All Agency Funds Liabilities Accounts payable Other deposits Dependent care benefits payable Total liabilities $ 122 TABLE OF CONTENTS STATISTICAL SECTION This part of Gilbert's Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements and note disclosures says about the Town's overall financial health. Contents Page Financial Trends 125 These schedules contain trend information to help the reader understand how Gilbert's financial performance and well-being have changed over time. Revenue Capacity 131 These schedules contain information to help the reader assess Gilbert's most significant local revenue source, sales tax. Debt Capacity 134 These schedules present information to help the reader assess the affordability of Gilbert's current levels of outstanding debt and Gilbert's ability to issue additional debt in the future. Demographic and Economic Information 139 These schedules offer demographic and economic indicators to help the reader understand the environment within which Gilbert's financial activities take place. Operating Information 141 These schedules contain service and infrastructure data to help the reader understand how the information in Gilbert's financial report relates to the services Gilbert provides and the activities it performs. Other Information 144 Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Report for the relevant year. 123 124 TABLE OF CONTENTS Schedule 1 Town of Gilbert, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (1,000's) 2010 Governmental activities Net investment in capital assets Restricted Unrestricted Total governmental activities net position Business-type activities Net investment in capital assets Restricted Unrestricted Total business-type activities net position Primary government Net investment in capital assets Restricted Unrestricted Total primary government net position $ $ $ $ $ 2011 707,100 43,766 66,030 816,896 $ 276,059 86,943 195,803 558,805 $ 983,159 130,709 261,833 $ 1,375,701 $ $ 2012 705,986 38,404 77,284 821,674 $ 294,516 76,504 209,680 580,700 $ $ 1,000,502 114,908 286,964 $ 1,402,374 $ $ 2013 695,983 52,219 83,273 831,475 $ 316,268 71,376 236,097 623,741 $ $ 1,012,251 123,595 319,370 $ 1,455,216 $ $ 687,910 60,525 107,172 855,607 $ 325,357 70,879 263,978 660,214 $ $ 1,013,267 131,404 371,150 $ 1,515,821 125 2014 $ $ 2015 680,717 80,924 92,357 853,998 $ 351,797 65,577 281,391 698,765 $ $ 1,032,514 146,501 373,748 $ 1,552,763 $ $ 2016 688,900 82,546 30,276 801,722 $ 363,333 54,084 290,870 708,287 $ $ 1,052,233 136,630 321,146 $ 1,510,009 $ $ 2017 735,369 83,227 49,960 868,556 $ 411,831 34,054 304,198 750,083 $ $ 1,147,200 117,281 354,158 $ 1,618,639 $ $ 753,973 72,780 60,983 887,736 399,537 42,814 342,616 784,966 $ 1,153,510 115,594 403,598 $ 1,672,702 2018 $ $ $ $ 790,285 76,701 45,964 912,950 392,632 34,499 389,336 816,467 $ 1,182,917 111,200 435,299 $ 1,729,416 2019 $ $ $ $ 792,864 87,450 67,904 948,218 462,857 30,972 379,636 873,465 $ 1,255,721 118,422 447,540 $ 1,821,683 TABLE OF CONTENTS Schedule 2 Town of Gilbert, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (1,000's) 2010 Expenses Governmental activities: General government: Management and policy Support services Finance and management services Court Development services Public works Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Interest and fiscal charges on long-term debt Total governmental activities expenses Business-type activities: Water Wastewater Environmental services Irrigation Total business-type activities expenses Total primary government expenses Program Revenues Governmental activities: Charges for services: Development services Police Fire Highways and streets Parks and recreation Other activities Operating grants and contributions Capital grants and contributions Total governmental activities program revenues $ 2,831 9,297 5,937 10,085 2,782 2011 $ 3,110 8,503 1,287 5,126 8,201 - 2012 $ 2,983 8,632 1,216 5,410 8,551 - 2013 $ 10,461 4,150 5,474 6,850 - 2014 $ 13,378 4,347 5,975 9,062 - 2015 $ 19,090 1,814 4,053 7,082 - 2016 $ 20,049 2,110 4,164 7,611 - 2017 $ 19,454 2,109 4,300 9,400 - 2018 $ 19,176 2,000 4,078 10,312 - 2019 $ 24,948 1,883 3,898 9,449 - 41,328 22,871 36,906 19,826 1,170 18,418 171,451 38,869 24,473 40,440 19,764 1,010 2,194 17,675 170,652 40,467 24,906 43,438 19,932 1,269 2,910 15,785 175,499 42,759 25,867 44,048 20,858 461 3,114 15,142 179,184 45,931 28,853 45,781 22,493 842 4,104 15,216 195,982 47,541 28,071 46,932 28,429 778 4,423 12,780 200,993 50,115 31,972 48,726 25,647 1,051 5,311 12,911 209,666 63,151 42,513 51,931 25,202 1,132 13,690 10,506 243,389 54,117 34,969 52,545 29,985 1,151 7,976 10,793 227,102 55,328 35,263 54,632 35,840 886 3,915 9,890 235,933 36,163 23,002 13,852 54 73,071 36,863 23,039 14,255 74,157 37,695 22,662 14,918 75,275 38,339 22,170 15,588 76,097 39,927 23,615 16,113 79,655 41,817 25,620 16,720 84,157 44,360 26,530 17,719 88,609 42,329 26,791 16,857 85,978 44,605 27,244 18,183 90,032 47,167 27,844 21,689 96,700 $ 244,522 $ 244,809 $ 250,773 $ 255,281 $ 275,637 $ 285,150 $ 298,275 $ 329,366 $ 317,134 $ 332,632 $ $ $ $ $ $ $ $ $ $ 4,027 6,374 79 1,659 3,735 789 19,206 39,632 75,501 3,178 2,891 136 1,739 3,740 853 21,168 28,002 61,707 5,347 5,584 129 1,497 3,595 861 21,045 26,060 64,117 7,240 5,512 185 1,516 3,706 1,017 21,270 36,089 76,535 126 6,783 5,477 254 1,440 3,765 1,066 22,326 19,186 60,297 6,608 4,526 224 1,643 4,146 829 24,171 37,214 79,361 6,826 5,343 197 1,745 4,366 873 38,666 65,535 123,551 6,900 7,484 231 1,951 4,603 844 33,204 41,877 97,094 7,227 3,826 360 1,887 4,700 748 28,381 32,904 80,033 8,318 3,609 386 16 4,355 1,136 30,012 36,203 84,037 TABLE OF CONTENTS Business-type activities: Charges for services: Water Wastewater Environmental services Irrigation Operating grants and contributions Capital grants and contributions Total business-type activities program revenues Total primary government program revenues $ Net (Expense)/Revenue Governmental activities Business-type activities Total primary government net expense $ (95,950) 21,172 $ (74,778) 34,601 21,024 16,567 25 22,026 94,243 169,744 General Revenues and Other Changes in Net Position Governmental activities: Taxes: Sales taxes $ 47,119 Property taxes 30,117 In-Lieu property taxes 1,328 Franchise taxes 2,448 Unrestricted state-shared revenue 35,952 Unrestricted grants and contributions 1,235 Unrestricted investment earnings 1,301 Gain on sale of capital assets 74 Miscellaneous 680 Transfers (346) Total governmental activities 119,908 Business-type activities: Investment earnings 739 Gain on sale of capital assets 148 Miscellaneous 1,544 Transfers 346 Total business-type activities 2,777 Total primary government $ 122,685 Change in Net Position Governmental activities Business-type activities Total primary government $ $ 23,958 23,949 47,907 $ 35,966 21,678 17,194 18,324 93,162 154,869 $ 36,692 22,740 17,924 37,222 114,578 178,696 $ 36,455 23,083 16,760 34,153 110,451 186,986 $ 37,867 23,852 17,308 36,252 115,279 175,576 $ 37,501 24,625 18,007 29,017 109,150 188,511 $ $ (108,945) 19,005 $ (89,940) $ (111,381) 39,303 $ (72,078) $ (102,649) 34,354 $ (68,295) $ (135,685) 35,624 $ (100,061) $ (121,632) 24,993 $ (96,639) $ $ $ $ $ $ $ $ $ $ 49,249 25,796 1,351 2,401 31,068 864 2,137 355 537 113,758 1,012 164 2,216 (537) 2,855 116,613 4,813 21,860 26,673 $ $ $ 54,513 21,502 1,331 2,463 33,882 1,349 1,910 178 4,744 (690) 121,182 1,244 39 1,765 690 3,738 124,920 9,801 43,041 52,842 $ $ $ 61,813 19,184 1,377 3,083 38,355 1,193 722 932 121 126,780 1,061 1,179 (121) 2,119 128,899 24,131 36,473 60,604 127 $ $ $ 66,757 18,315 1,287 2,616 41,323 904 1,508 29 1,226 110 134,076 1,742 30 1,266 (110) 2,928 137,004 (1,609) 38,552 36,943 $ $ $ 71,773 19,423 1,201 2,737 44,263 2,595 1,224 106 847 184 144,353 1,457 172 1,310 (184) 2,755 147,108 22,722 27,748 50,469 $ $ $ $ 39,457 25,116 18,141 1,051 43,655 127,421 250,972 $ (86,115) 38,812 (47,303) $ (146,295) 34,107 $ (112,188) $ (147,069) 29,589 $ (117,479) $ (151,895) 26,879 $ (125,017) 77,070 19,424 1,187 2,989 45,028 3,204 2,651 136 1,162 98 152,949 $ $ $ 2,666 158 259 (98) 2,984 155,933 66,834 41,796 108,630 $ $ $ 40,696 26,032 18,270 953 34,134 120,084 217,178 82,797 20,761 1,159 2,814 52,861 2,400 859 154 1,224 446 165,475 1,009 92 121 (446) 776 166,251 19,180 34,883 54,063 $ $ $ $ 42,868 26,517 18,437 1,184 30,615 119,622 199,655 89,497 21,549 1,124 2,911 52,193 2,444 1,549 1,333 1,352 (64) 173,888 1,894 39 172 64 2,169 176,057 26,820 31,758 58,579 $ $ $ $ 45,508 28,686 20,633 1,720 27,032 123,578 207,616 98,648 25,220 1,024 2,954 53,777 3,036 10,153 1,466 1,153 (242) 197,189 11,494 183 366 242 12,284 209,473 45,293 39,163 84,456 TABLE OF CONTENTS Schedule 3 Town of Gilbert, Arizona Program Revenues by Function Last Ten Fiscal Years (1,000's) 2010 2012 2013 2014 2015 2016 2017 2018 2019 8,495 3,447 45,193 11,649 314 - 3,989 3,163 39,324 9,422 215 51 7,689 6,892 25,634 15,314 624 135 7,669 4,079 41,280 14,475 662 51 7,207 3,697 28,218 12,461 712 51 8,975 3,766 44,497 13,012 639 51 10,645 4,170 69,791 29,861 635 50 11,551 3,877 54,059 18,190 626 50 7,829 4,203 44,943 12,158 630 50 8,544 4,687 43,133 15,035 648 1,136 Subtotal governmental activities 75,501 61,707 64,118 76,535 60,297 79,361 123,551 97,094 80,033 84,037 Business-type activities: Water Wastewater Environmental services a Irrigation 47,232 30,419 16,567 25 46,133 29,835 17,194 - 56,904 39,735 17,938 - 55,662 38,029 16,760 - 57,750 40,220 17,308 - 55,590 35,552 18,008 - 68,102 41,178 18,141 - 61,546 37,232 21,307 - 64,056 36,232 19,334 - 65,489 36,344 21,746 - Subtotal business-type activities 94,243 93,162 114,577 110,451 115,278 109,150 127,421 120,084 119,622 123,578 $ 169,744 $ 154,869 $ 178,695 $ 186,986 $ 175,575 $ 188,511 $ 250,972 $ 217,178 $ 199,655 $ 207,616 Total primary government a 2011 Function/Program Governmental activities: General government: Management and policy $ Support services a Finance and management services Court Development services Public works a Public Safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental 10 215 597 4,576 1,005 $ 15 649 9 597 4,273 - $ 16 242 11 670 6,891 - $ 36 251 792 7,240 - $ 59 262 823 6,807 - $ 962 27 824 6,608 - $ 690 24 859 6,826 - $ 991 20 831 6,900 - The public works function, support services function, and irrigation services were eliminated in fiscal years 2012, 2013, and 2010, respectively. 128 $ 2,235 27 731 7,227 - $ 1,830 7 700 8,318 - TABLE OF CONTENTS Schedule 4 Town of Gilbert, Arizona Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (1,000's) General fund Reserved Unreserved Nonspendable Restricted Committed Assigned Unassigned Total general fund $ $ 2010 2011a 2012 2013 2014 21,383 $ 33,168 54,551 $ - $ 22,317 10,729 33,521 66,568 $ - $ 23,213 10,797 44,250 78,260 $ - $ 23,527 10,092 59,555 93,174 $ - $ - $ - $ - $ - $ 25,380 24,470 19,866 18,995 17,877 23,061 12,081 17,046 13,681 32,766 41,371 41,631 61,764 67,057 85,498 82,885 72,453 89,787 99,225 $ 108,573 $ 119,046 $ 134,646 $ 131,701 $ 154,479 2015 2016 2017 2018 2019 All other governmental funds Reserved - $ - $ - $ - $ - $ - $ - $ - $ $ 45,147 $ Unreserved, reported in: 27,635 Special revenue funds Debt service funds Capital projects funds 86,482 114,117 Total Unreserved 4 2 1 83 2 4 Nonspendable 2 1 108,051 100,572 89,654 92,337 96,837 87,005 Restricted 139,725 134,441 110,470 28,261 26,159 36,258 18,764 22,462 38,337 Assigned 34,387 15,971 (20,781) (23,199) (23,609) (25,466) (23,981) (19,897) Unassigned (19,353) (18,311) (17,424) Total all other governmental funds $ 159,264 $ 115,535 $ 103,534 $ 102,304 $ 85,718 $ 95,320 $ 105,449 $ 154,760 $ 132,102 $ 93,047 a GASB Statement No. 54 was implemented in fiscal year 2011. This statement established new fund balance classifications for governmental funds. 129 TABLE OF CONTENTS Schedule 5 Town of Gilbert, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (1,000's) Revenues Taxes: Sales Property Franchise Special assessments Licenses and permits Intergovernmental Charges for services Other entities' participation System development fees Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues $ 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 46,873 $ 33,073 2,448 437 2,614 72,535 8,795 1,234 11,608 124 4,445 1,286 754 186,226 49,315 $ 28,732 2,401 559 2,365 55,362 7,288 2,313 8,736 176 4,351 2,106 355 164,059 54,503 $ 24,045 2,463 879 3,995 61,468 8,164 1,300 17,957 186 4,442 1,889 4,947 186,238 61,890 $ 21,548 2,374 1,299 5,434 72,904 9,573 2,252 17,836 119 4,710 706 933 201,578 66,772 $ 20,681 2,700 2,090 4,748 68,046 10,027 1,977 13,435 155 4,469 1,494 1,255 197,849 71,794 $ 21,953 2,737 1,184 4,791 76,284 10,440 382 18,836 192 4,476 1,210 953 215,232 77,108 $ 22,000 3,389 2,233 4,787 77,007 11,147 1,666 22,944 187 4,618 2,639 14,797 244,523 82,980 $ 23,707 2,814 696 4,785 87,364 11,161 2,252 18,101 120 4,336 836 5,683 244,835 89,516 $ 24,468 2,911 958 4,645 84,923 12,151 1,585 17,617 195 4,065 1,523 1,796 246,352 98,671 25,220 2,954 818 5,735 86,480 12,816 4,380 21,966 183 3,305 9,890 1,153 273,572 3,458 10,257 5,261 9,204 1,225 3,845 9,239 1,416 4,403 7,160 - 3,676 9,160 1,722 4,617 7,514 - 12,584 4,235 4,753 5,999 - 15,336 4,413 5,089 6,078 - 20,485 1,943 3,493 6,069 - 20,997 2,134 3,608 6,239 - 22,001 2,270 3,657 7,049 - 21,858 2,338 3,600 7,200 - 22,942 2,396 3,752 7,701 - Expenditures Current: General government: Management and policy Support services Finance and management services Court Development services Public works Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service: Principal Interest Payment to refunded bond escrow agent Bond issuance costs Fiscal and other charges Capital outlay Total expenditures 37,669 20,115 10,097 12,684 1,170 - 35,007 20,200 9,736 12,591 1,010 2,194 36,384 21,552 10,815 12,688 1,269 2,910 38,817 22,543 10,637 13,895 461 3,114 41,947 24,993 11,969 15,614 841 4,104 43,084 25,631 12,478 21,836 774 4,423 44,402 28,295 12,831 18,591 1,046 5,311 54,397 32,048 14,680 19,660 1,135 13,690 53,174 35,698 14,545 24,351 1,151 7,976 58,327 35,828 15,769 30,482 888 3,915 31,855 18,553 9 58,785 220,342 29,215 18,451 20 41,935 196,422 23,055 15,992 402 9 34,500 186,265 24,705 15,411 13 30,849 188,016 25,630 14,252 13 38,804 209,083 23,750 13,108 209 307 58,849 236,439 30,105 13,773 37 36,573 223,942 34,935 11,583 779 9 34,111 252,004 33,965 11,758 12,096 408 14 50,895 281,026 34,190 11,242 35 71,644 299,112 Excess (deficiency) of revenues over (under) expenditures (34,116) (32,363) (27) 13,562 (11,234) (21,207) 20,581 (7,169) (34,674) (25,539) Other financing sources (uses) Transfers in Transfers out Proceeds from sale of capital assets Revenue obligations issued Premium on revenue obligations Bonds issued Premium on bonds Payment to refunded bond escrow agent Total other financing sources and uses 26,608 (25,634) 974 25,272 (24,586) 686 25,195 (25,885) 37,925 4,111 (41,627) (281) 25,774 (25,653) 121 45,891 (45,781) 590 700 23,401 (23,216) 36,980 2,706 28,080 4,417 (32,211) 40,157 21,406 (21,385) 21 23,334 (22,881) 121,670 14,139 (64,182) 72,080 29,999 (30,063) 1,226 49,525 7,546 (49,162) 9,070 63,086 (63,324) 1,691 1,453 (33,142) $ (31,677) $ 13,683 $ (10,534) $ 18,950 $ 20,601 $ 64,911 $ (25,604) $ (24,086) 31.2% 30.9% 25.5% 23.4% 20.8% 23.4% 21.3% 25.1% 20.0% Net change in fund balances $ Debt service as a percentage of noncapital expenditures (308) $ 25.7% 130 TABLE OF CONTENTS Schedule 6A Town of Gilbert, Arizona Sales Tax Collections by Category Fiscal Years 2010 - 2016 2010 Construction Manufacturing Communications & Utilities Wholesale Retail Restaurant & Bar Real Estate, Rental & Leasing Accommodation Services b b Other Transportation & Warehousing Finance & Insurance Public Administration Arts & Entertainment Total $ 5,193,872 635,188 5,724,639 610,065 23,775,975 3,566,427 5,249,645 1,002,691 481,122 16,464 100,293 9,503 506,855 2011 $ 4,389,279 706,514 5,562,364 854,466 25,540,515 3,820,368 5,874,288 252,974 1,069,661 652,043 21,161 89,990 481,592 a 2012 $ 5,718,727 727,755 5,774,403 965,523 28,390,526 4,072,187 6,078,364 299,270 1,211,864 520,302 25,830 112,496 4,586 600,794 2013 $ 7,867,067 763,152 5,931,935 1,100,749 30,784,509 4,402,299 7,944,973 377,228 1,369,608 487,279 25,667 154,772 2,271 594,043 2014 $ 8,837,079 939,861 6,120,225 1,207,006 33,078,748 4,867,638 7,952,365 487,680 1,676,438 505,146 22,721 398,169 4,311 674,274 2015 $ 7,663,801 882,509 6,342,578 1,320,977 37,463,617 5,526,275 8,286,878 533,870 2,018,647 629,740 30,529 438,257 3,020 652,973 $ 7,326,040 1,042,710 6,327,257 1,486,450 40,406,219 6,177,869 9,290,919 569,390 2,223,706 784,957 37,823 557,582 18,977 858,177 $ 77,108,076 $ 46,872,739 $ 49,315,215 $ 54,502,627 $ 61,805,552 $ 66,771,661 $ 71,793,671 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Gilbert's local sales tax rate 2016 1.5% Source: Arizona Department of Revenue a Effective July 1, 2016, the Arizona Department of Revenue changed the way taxpayers report city tax on their tax returns and simultaneously changed the manner in which they summarize the tax data in their reports to the cities. As a result, we no longer receive the tax data in the same categories that we had in the past. See Schedule B for fiscal years 2017 forward. b Prior to fiscal year 2011, Accommodations was included in the "Other" category due to confidentiality requirements. out into its own category. Note: State and local laws prohibit the disclosure of individual taxpayer information. 131 Beginning in fiscal year 2011, it was broken TABLE OF CONTENTS Schedule 6B Town of Gilbert, Arizona Sales Tax Collections by Category Fiscal Years 2017 - 2019 a 2017 Accommodation Amusement Communications & Utilities $ Construction Contracting Maintenance, Repair, Replacement & Alterationb Personal Property Rental Publications, Advertising & Job Printing Rental of Commercial Property/Non-Residential Residential Rental Restaurant & Bar Retail Tax License Fees Other Total $ 599,950 793,681 5,625,248 9,611,076 89,165 1,392,591 2018 $ 598,668 844,634 5,763,531 10,833,291 $ 1,535,298 174,054 4,116,417 3,367,073 6,974,438 49,491,813 14,632 730,191 165,942 4,435,844 3,652,056 7,638,319 53,366,713 13,246 668,812 82,980,329 $ 89,516,354 1.5% 1.5% Gilbert's local sales tax rate 2019 728,224 922,856 5,707,201 13,167,940 1,706,431 166,146 4,790,946 4,238,867 8,549,495 57,710,844 9,646 972,655 $ 98,671,251 1.5% Source: Arizona Department of Revenue a Effective July 1, 2016, the Arizona Department of Revenue changed the way taxpayers report city tax on their tax returns and simultaneously changed the manner in which they summarize the tax data in their reports to the cities. As a result, we no longer receive the tax data in the same categories that we had in the past. See Schedule 6A for Fiscal Years 2010 - 2016 data. b Maintenance, Repair, Replacement & Alteration has been combined with Construction Contracting due to disclosure laws concerning confidentiality. Note: State and local laws prohibit the disclosure of individual taxpayer information. 132 TABLE OF CONTENTS Schedule 7 Town of Gilbert, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years 2010 2011 2012 2013a 2014 2015 2016 2017 2018 2019 Town Direct Rates: Hotel/Transient Lodging All Others 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.30% 1.50% 4.30% 1.50% County Rates: Hotel/Transient Lodging All Others 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% State Rates: Hotel/Transient Lodging All Others 6.50% 6.60% 6.50% 6.60% 6.50% 6.60% 6.50% 6.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% Source: Gilbert Finance & Management Services Department a The temporary state sales tax increase passed by voters in 2010 expired on May 31, 2013. 5.50% and for all others to 5.60% on June 1, 2013. Note: Gilbert sales tax rate may be changed with the approval of Council. 133 The state sales tax for hotel/transient lodging decreased to TABLE OF CONTENTS Schedule 8 Town of Gilbert, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years Special Assessment Bonds Governmental Activities Municipal Street and Property Highway User Corporation Revenue Revenue Bonds Bonds Business-type Activities General Obligation Bonds Water and Wastewater Revenue Bonds Municipal Property Corporation Revenue Bonds - $ 17,861,117 $ 16,527,813 15,164,911 13,757,813 160,388,430 143,200,304 118,853,753 111,081,450 Fiscal Year General Obligation Bonds 2010 2011 2012 2013 $ 204,147,283 $ 178,722,625 159,547,197 147,640,933 11,548,249 $ 11,457,958 11,056,456 10,469,338 27,712,795 $ 25,502,688 20,836,060 18,130,241 169,750,000 $ 161,045,000 152,243,537 142,828,198 2014 2015 2016 135,775,830 123,420,395 105,296,311 9,445,797 8,306,402 6,504,185 16,864,197 13,754,807 10,538,003 133,835,907 126,607,711 118,310,093 39,685,688 39,685,688 247,585 - - - 2017 2018 2019 157,102,290 140,551,095 122,209,904 6,126,440 5,464,645 4,912,850 7,174,209 3,664,605 - 109,229,636 95,342,840 81,835,435 39,637,764 38,887,844 38,122,923 - - - Revenue Obligations - $ Notes: See Schedule 13 for personal income and population data Details regarding Gilbert's outstanding debt can be found in the notes to the financial statements Includes unamortized bond discounts/premiums 134 7,127,925 $ 5,540,340 3,877,755 2,115,170 Special Assessment Bonds Total Primary Government $ Percentage of Personal Income Per Capita 598,535,799 541,996,729 481,579,670 446,023,143 9.40 % $ 8.56 7.72 6.31 2,871 2,587 2,277 2,066 104,083,879 98,190,924 135,410,861 400,253,194 409,965,927 415,745,141 6.09 5.89 5.52 1,807 1,804 1,789 134,594,390 170,517,212 160,502,481 453,864,729 454,428,241 407,583,593 5.30 5.13 4.64 1,833 1,835 1,571 TABLE OF CONTENTS Schedule 9 Town of Gilbert, Arizona Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years General Bonded Debt Outstanding b Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 a b $ 211,275,208 184,262,965 163,424,952 149,756,103 136,023,415 123,420,395 105,296,311 157,102,290 140,551,095 122,209,904 $ Less Amount Available in Debt Service Fund Net General Bonded Debt Outstanding 6,720,588 6,366,097 $ 204,554,620 177,896,868 9,335,818 9,599,968 8,942,949 10,165,593 6,952,183 2,186,272 6,020,480 1,870,513 154,089,134 140,156,135 127,080,466 113,254,802 98,344,128 154,916,018 134,530,615 120,339,391 $ Percentage of Applicable Property Value Secondary Assessed Property Value a Limited Property Value a 2,672,949,852 2,297,228,317 N/A N/A 7.65 % 7.74 1,861,193,961 1,675,360,422 1,594,806,737 1,829,471,839 N/A N/A N/A N/A N/A N/A N/A N/A 1,845,325,449 1,979,359,269 2,105,762,268 2,256,162,227 8.28 8.37 7.97 6.19 5.33 7.83 6.39 5.33 $ Per Capita $ 981 849 729 649 574 498 423 626 543 464 Maricopa County Assessor's Office Includes unamortized bond discounts/premiums. Notes: In accordance with Proposition 117, The Arizona Property Tax Assessed Valuation Amendment , property taxes are calculated based on the limited property value beginning with tax year 2015. See Schedule 13 for population data. General obligation bonds principal and interest payments are paid for with secondary property taxes. 135 TABLE OF CONTENTS Schedule 10 Town of Gilbert, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2019 Governmental Unit Debt repaid with property taxes Maricopa County b Maricopa County Community College District c Maricopa County Special Health District Gilbert Unified School District No. 41 Higley Elementary School District No. 60 Chandler Unified School District No. 80 Mesa Unified School District No. 4 East Valley Institute of Technology District No. 401 d $ Debt Outstanding Estimated Percentage Applicable a None 312,450,000 459,125,000 117,425,000 103,045,000 227,076,666 245,505,000 None 5.58% 5.58% 5.58% 70.06% 88.66% 12.93% 0.36% 12.55% Estimated Share of Direct and Overlapping Debt $ Subtotal, overlapping debt Town of Gilbert direct debt e None 17,434,710 25,619,175 82,267,955 91,359,697 29,361,013 883,818 None 246,926,368 247,081,112 100.00% Total direct and overlapping debt 247,081,112 $ 494,007,479 Source: The various jurisdictions a Proportion applicable to Town of Gilbert, Arizona is computed on the ratio of limited property valuation for fiscal year 2018/19. b Excludes various other non-property tax supported debt such as Public Finance Corporation lease revenue bonds, Stadium District revenue bonds, Stadium District loans, Housing Authority loans and capital leases. Excludes non-property tax supported debt such as revenue bonds. d Based on the East Valley Institute of Technology's secondary assessed valuation and does not include amount of secondary assessed valuation in Pinal County. e Includes: General Obligation bonds, Special Assessments bonds, Revenue obligations, Revenue bonds and unamortized bond premiums. c Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of Gilbert. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Gilbert. This process recognizes that, when considering Gilbert's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping government. 136 TABLE OF CONTENTS Schedule 11 Town of Gilbert, Arizona Legal Debt Margin Information Last Ten Fiscal Years 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20% Limitation Debt limit equal to 20% of net full cash assessed valuation $ Total net debt applicable to 20% limit Premium adjustment Legal 20% debt margin (available borrowing capacity) $ Total net debt applicable to the 20% limit as a percentage of 20% debt limit 471,773,198 $ 437,048,132 $ 369,996,694 $ 333,373,568 $ 317,092,733 $ 346,856,631 $ 369,065,090 $ 395,871,854 $ 524,748,518 $ 566,219,031 195,320,000 175,915,000 163,335,000 149,675,000 135,310,000 122,715,000 105,250,000 143,945,000 128,090,000 110,445,000 - - - - - - - 9,675,637 9,516,726 8,090,801 447,683,230 276,453,198 $ 261,133,132 $ 206,661,694 $ 183,698,568 $ 181,782,733 $ 224,141,631 $ 263,815,090 $ 242,251,217 $ 387,141,792 $ 41.40% 40.25% 44.14% 44.90% 42.67% 35.38% 28.52% 38.81% 26.22% 141,531,960 $ 131,114,440 $ 110,999,008 $ 100,012,071 $ 95,127,820 $ 104,056,989 $ 110,719,527 $ 118,761,556 $ 157,424,555 $ 20.93% 6% Limitation Debt limit equal to 6% of net full cash assessed valuation $ Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) Total net debt applicable to the 6% limit as a percentage of 6% debt limit - $ 141,531,960 $ 0.00% - 131,114,440 $ 0.00% - 110,999,008 $ 0.00% - 100,012,071 $ 0.00% - 95,127,820 $ 0.00% - 104,056,989 $ 0.00% - 110,719,527 $ 0.00% - 118,761,556 $ - - 157,424,555 $ 0.00% 169,865,709 0.00% 169,865,709 0.00% Legal Debt Margin Calculation for Fiscal Year 2019 Net full cash assessed valuation as of June 30, 2019 $ 2,831,095,155 20% Limitation Debt limit equal to 20% of net full cash assessed valuation 566,219,031 Debt applicable to limit: General obligation bonds Premium adjustment 110,445,000 8,090,801 Legal 20% debt margin (available borrowing capacity) $ 447,683,230 6% Limitation Note: The Constitution of the State of Arizona establishes two levels of bonded indebtedness limits based upon the type of improvement constructed with the debt. The twenty percent bond type is restricted to water, wastewater, electric, parks and open space improvements, streets, public safety, and fire and emergency facilities. The six percent bond type is all other general purpose improvements. In 2017, HB 2452: bonding; amortized premium; segregated fund passed, requiring the net premium associated with a general obligation bond to be amortized for all debt limitation purposes on a pro-rata basis each year. 137 Debt limit equal to 6% of net full cash assessed valuation 169,865,709 Debt applicable to limit: General obligation bonds Legal 6% debt margin (available borrowing capacity) $ 169,865,709 TABLE OF CONTENTS Schedule 12 Town of Gilbert, Arizona Pledged-Revenue Coverage Last Ten Fiscal Years Public Facilities Municipal Property Corp. Revenue Bonds Special Assessment Bonds & Subordiante Lien Pledged Revenue Obligations Special Fiscal Assessment Year Collections 2010 $ Excise Taxes & State-Shared Debt Service Principal Interest Coverage 437,493 $ 85,000 $ 149,370 1.87 559,284 90,000 587,245 0.83 2012 878,981 400,000 574,655 2013 1,298,984 585,000 553,258 2014 2,089,887 1,020,000 2015 1,184,368 1,135,000 2016 2,232,678 1,795,000 2017 695,541 375,000 2018 952,679 660,000 2019 818,092 550,000 2011 Revenue $ Fiscal Operating Operating Available Year Revenues a Expenses a Revenue 2010 a b c Net $ Interest Coverage 91,609,318 $ 8,705,000 $ 8,014,525 5.48 89,202,148 9,030,000 7,705,188 5.33 0.90 97,342,250 9,335,000 7,149,316 5.91 1.14 109,637,647 9,695,000 6,873,353 6.62 507,965 1.37 117,627,904 10,080,000 6,458,288 7.11 470,225 0.74 125,743,087 7,515,000 6,030,998 9.28 394,755 1.02 133,104,631 8,000,000 7,457,791 8.61 321,073 1.00 146,007,063 9,660,000 6,877,081 8.83 294,670 1.00 159,912,939 14,355,000 4,721,073 8.38 264,095 1.00 170,885,312 12,745,000 5,213,731 9.52 Water and Wastewater Revenue Bonds c Less: Debt Service Principal Water Resources Municipal Property Corp. Revenue Bonds Debt Service Principal Interest Coverage $ Net Water Available System Wastewater System Revenue b Dev't Fee Dev't Fee Debt Service Principal Interest Coverage 57,096,936 $ 32,034,177 $ 25,062,759 $ 1,315,000 $ 803,313 11.83 22,944,446 $ 8,491,638 $ 8,715,622 $ 3,300,000 $ 7,910,188 3.58 2011 59,780,559 33,231,244 26,549,315 1,355,000 763,863 12.53 24,430,452 6,485,383 6,878,502 3,400,000 7,198,049 3.57 2012 61,087,190 34,505,518 26,581,672 1,385,000 723,213 12.61 24,473,459 13,590,998 15,154,154 3,550,000 6,096,337 5.52 2013 60,627,063 36,124,117 24,502,946 1,430,000 681,663 11.60 22,391,283 12,466,409 - 3,700,000 5,542,403 3.77 2014 62,873,206 37,514,942 25,358,264 1,500,000 610,163 12.02 23,248,101 10,567,046 - 3,875,000 5,198,059 3.73 2015 63,338,422 40,316,645 23,021,777 - - N/A 23,021,777 10,461,708 - 4,075,000 4,894,864 3.73 2016 64,659,329 42,119,371 22,539,958 - - N/A 22,539,958 11,873,824 - 4,275,000 4,683,019 3.84 2017 66,788,603 41,921,216 24,867,387 - - N/A 24,867,387 9,914,166 - 4,830,000 4,984,570 3.54 2018 69,487,792 45,014,122 24,473,670 - - N/A 24,473,670 9,944,975 5,308,292 8,480,000 4,970,948 2.95 2019 74,465,811 44,686,700 29,779,111 - - N/A 29,779,111 9,434,032 5,189,779 7,225,000 6,207,163 3.31 Combined operating revenues and expenses for the Water and Wastewater Funds, as applicable. Combined operating revenues and expenses for the Water and Wastewater Funds less debt service payments for the Water and Wastewater Revenue Bonds. These bonds were paid off in fiscal year 2014. Note: Details regarding Gilbert's outstanding debt can be found in the notes to the financial statements. 138 TABLE OF CONTENTS Schedule 13 Town of Gilbert, Arizona Demographic and Economic Statistics Last Ten Fiscal Years Personal Income b Fiscal Year Population 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 208,453 209,468 211,491 215,938 221,506 227,217 232,399 247,600 247,600 259,386 Per Capita Income c (in thousands) (estimate) a $ 6,370,000 6,329,000 6,240,000 7,064,000 6,568,000 6,962,000 7,534,000 8,558,000 8,858,000 8,775,000 $ (estimate) Median Age c School Enrollment d Unemployment Rate e 30,559 29,731 28,413 31,035 28,184 30,639 32,418 34,565 35,777 33,831 30.7 32.7 31.5 33.1 37.5 32.7 33.2 33.1 34.4 35.2 39,089 38,660 38,696 38,573 38,573 37,240 34,079 35,449 34,552 33,393 5.1% 5.1% 5.4% 5.7% 5.2% 4.3% 4.2% 3.7% 3.5% 3.8% Sources: 2009 through 2016 Census.gov; 2017 and 2018 Office of Management & Budget; 2019 Maricopa Association of Governments b Estimated based on population and per capita income c 2009 through 2015: American Community Survey; 2016 through 2019: Census.gov d Arizona Department of Education; beginning in 2011, school enrollment was obtained from the Gilbert Public Schools website. e laborstats.az.gov a Note: The 2008 through 2010 median age, school enrollment, and unemployment rates were obtained from Gilbert's Development Services Department. 139 TABLE OF CONTENTS Schedule 14 Town of Gilbert, Arizona Top Ten Principal Employers Current Fiscal Year Compared to Nine Years Ago Employer Fiscal Year 2019 Percentage of Total Town Employees Rank Employment Gilbert Unified School District Banner Health Town of Gilbert Go Daddy Software, Inc. Fry's Food and Drug Higley Unified School District B H Drywall Dignity Health Wal-Mart Stores, Inc. Isagenix International Target Stores, Inc. Mercy Gilbert Medical Center Costco 2,816 1,772 1,482 1,426 1,166 1,112 997 956 897 710 ------- Total 13,334 1 2 3 4 5 6 7 8 9 10 Source: Maricopa Association of Governments 140 Fiscal Year 2010 Percentage of Total Town Employees Rank Employment 3.03% 1.91% 1.60% 1.54% 1.26% 1.20% 1.07% 1.03% 0.97% 0.77% ------- 4,718 1,501 1,278 707 650 934 ----1,550 --1,100 817 600 14.37% 13,855 1 3 4 8 9 6 2 5 7 10 5.64% 1.79% 1.53% 0.85% 0.78% 1.12% ----1.85% --1.31% 0.98% 0.72% 16.57% TABLE OF CONTENTS Schedule 15 Town of Gilbert, Arizona Full-time Equivalent Employees by Function Last Ten Fiscal Years 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Function Governmental Funds General government: Management and policy 29.2 21.2 22.2 88.5 95.8 120.0 128.6 131.6 132.6 Support services 88.3 62.0 62.0 - - - - - - - - 18.25 19.3 29.0 19.0 19.0 21.0 21.0 25.0 25.5 Court 52.9 52.9 51.9 49.9 51.9 32.9 32.9 32.9 33.9 33.9 Development services 70.5 72.5 72.5 69.6 68.8 73.3 66.7 68.7 83.7 84.5 Public works 17.5 - - - - - - - - - Police 346.0 346.0 346.0 346.0 349.0 354.0 358.0 369.0 385.5 409.5 Fire 197.0 197.0 197.0 197.0 201.0 201.0 203.0 210.0 217.0 216.0 Finance and management services 136.1 Public safety: Highways and streets 49.3 49.3 49.3 51.0 58.0 58.0 51.7 51.7 53.7 55.7 Parks and recreation 106.8 101.7 102.0 106.8 121.8 118.7 125.3 126.2 128.3 128.5 Water 83.0 118.1 120.0 118.2 118.0 116.5 125.0 130.0 131.0 133.5 Wastewater 40.7 40.7 41.7 41.7 44.7 45.4 42.5 42.5 43.5 45.5 Environmental services 79.0 79.0 78.5 79.0 83.5 84.0 94.3 96.3 97.3 100.3 Irrigation 0.7 - - - - - - - - - 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 1,186.9 1,184.8 1,188.4 1,202.7 1,237.5 1,248.8 1,275.0 1,305.9 1,357.5 1,395.0 Enterprise Funds Internal Service Funds Equipment maintenance Total Source: Gilbert Office of Management & Budget 141 TABLE OF CONTENTS Schedule 16 Town of Gilbert, Arizona Operating Indicators by Function Last Ten Fiscal Years 2010 Function General government: Management and policy % of population satisfied with value received from tax dollar Number of recruitments Employee turnover Legal and court Case filings % of cases charged after review Development services Building permits issued Value of permits issued (in millions) Public Safety: Police Number of arrests Crimes per 1,000 population Fire Number of emergency calls Response time average (enroute to on-scene) b Total dispatch time (dispatch to onscene) b Highways and streets Average pavement condition index 2011 2012 a N/A 79 6.8% 2013 2014 2015 a N/A 148 8.3% 2016 a N/A 149 9.3% 2018 2019 71% 156 10.3% 79% 199 10.4% 77% 110 8.0% 75% 155 7.5% 26,271 72% 31,794 72% 28,896 72% 29,499 71% 32,091 70% 29,501 74% 26,147 74% 24,244 70% 2,219 $ 238.7 3,474 $ 474.9 3,418 $ 534.4 3,254 $ 472.5 3,364 $ 496.0 3,584 $ 553.8 4,157 $ 532.2 4,607 $ 531.6 4,441 $ 746.3 11,411 20.4 8,330 19.3 9,003 18.3 8,734 16.5 8,474 16.6 8,900 15.5 8,702 15.3 8,250 15.5 8,360 15.2 8,061 13.2 13,566 3 min 43 sec 13,946 3 min 37 sec 14,133 3 min 49 sec 15,509 3 min 47 sec 16,185 3 min 51 sec 17,777 3 min 57 sec 18,923 3 min 55 sec 19,422 5 min 9 sec 20,506 3 min 32 sec 4 min 48 sec 20,903 3 min 25 sec 4 min 44 sec 86% 90 4.9% 90% 86 6.6% 32,299 64% 25,888 64% 2,506 $ 324.3 N/A N/A N/A N/A N/A N/A 74% 175 9.7% 2017 N/A N/A 91 91 91 80 75 75 72 74 72 73 15,681 N/A 50,038 16,637 N/A 47,493 16,880 N/A 48,725 16,277 N/A 52,714 16,440 N/A 52,616 N/A 11,747 62,815 N/A 19,835 69,423 N/A 18,000 71,651 N/A 16,000 98,286 N/A 16,670 113,245 Parks and recreation Facility reservation requests c Facility reservations c Participants in recreation programs d Transportation Average daily ridership 835 845 560 635 685 687 669 679 784 668 Water Daily average water production (mg) Average # of meters read per month Number of utility locates 42 71,814 12,373 42 71,910 10,576 43 73,469 15,190 43 71,952 23,277 43 72,712 20,235 43 73,199 20,100 43 82,871 21,197 46 83,945 26,850 47 84,243 27,380 47 84,147 23,157 Wastewater Daily average wastewater influent (mg) Annual effluent produced/reused (bg) 12.91 4,420 12.67 4,840 12.20 4,457 12.79 4,667 12.82 4,646 13.21 4,822 14.03 4,815 14.91 4,931 15.41 5,115 16.20 5,784 110,403 19,191 111,943 19,242 109,472 18,653 115,536 18,695 113,965 19,851 112,778 19,418 114,144 19,894 110,520 22,567 113,745 24,058 129,737 21,120 Environmental services Solid waste tonnage Recycle tonnage Source: Various Town departments a Survey completed every other year b Beginning in 2017, the Fire Department began reporting total dispatch time instead of average time enroute to on-scene Beginning in 2015, tracking actual facility reservations d Only includes adult sports, youth ball programs, adaptive recreation, and town-sponsored special events c Indicator no longer being tracked. 142 TABLE OF CONTENTS Schedule 17 Town of Gilbert, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 156 166 164 164 180 185 217 224 251 249 9 9 10 10 10 10 10 10 10 11 Highways and streets Street centerline miles (estimate) a Traffic control signals 903 168 923 173 979 175 989 177 905 180 1,032 185 1,055 185 908 194 920 201 926 206 Parks and recreation Total acres of park land, trails, open space, municipal areas and support facilities, operated and maintained 690 690 652 653 605 605 605 645 645 645 1,175 1,189 1,216 1,219 1,261 1,304 1,660 1,322 1,335 1,366 860 868 970 976 1,006 1,019 1,038 887 896 923 57 61 61 61 66 67 57 56 71 63 Function Public safety: Police Number of police cars Fire Fire stations Water Miles of water main c Wastewater Miles of wastewater main c Environmental services Garbage trucks b Source: Various Town departments a The street centerline miles were previously estimated using different methods, such as end of warranty and beginning of Town ownership. Beginning in 2015, the estimate is based on acceptance letter date. b Prior to fiscal year 2016, wheel loaders were included in the statistic. c Beginning in 2017, estimates were updated to exclude miles not owned by Gilbert. Note: No capital asset statistics are available for the general government or transportation functions. 143 TABLE OF CONTENTS Schedule 18 Town of Gilbert, Arizona Property Value, Construction and Bank Deposits Last Ten Fiscal Years Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Residential Construction a Number of Permits Value 1,427 1,130 2,331 2,015 1,613 1,668 1,764 1,754 1,604 1,535 $ 213,032,031 182,201,825 408,322,951 385,182,885 315,632,904 350,707,421 402,071,499 336,676,752 312,805,353 467,961,355 Commercial Construction a Number of Permits Value 147 180 182 224 284 268 278 264 199 155 $ 67,488,230 25,831,880 31,550,416 102,447,825 99,959,286 81,934,987 71,594,349 119,477,874 129,703,582 164,601,167 Other Construction a Number of Permits Value 932 909 961 1,179 1,357 1,428 1,542 2,139 2,804 2,751 $ 43,754,466 $ 30,710,863 35,017,191 46,773,456 56,890,360 63,344,257 80,164,565 76,023,423 89,093,501 113,774,277 Secondary Assessed Property Value b 2,672,949,852 2,297,228,317 1,861,193,961 1,675,360,422 1,594,806,737 1,829,471,839 N/A $ N/A N/A N/A Limited Property Value b Maricopa County Bank Deposits c N/A $ 61,925,568,000 N/A 60,408,631,000 N/A 61,673,751,000 N/A 65,485,982,000 N/A 70,253,713,000 N/A 76,889,448,000 1,845,325,449 84,014,143,000 1,979,359,269 92,567,543,000 2,105,762,268 98,288,781,000 2,256,162,227 107,879,366,000 Sources: Development Services Department b Maricopa County Assessor's Office c Federal Deposit Insurance Corporation a Note: In accordance with Proposition 117, The Arizona Property Tax Assessed Valuation Amendment, property taxes are calculated based on the limited property value beginning with tax year 2015. 144 TABLE OF CONTENTS Schedule 19 Town of Gilbert, Arizona System Development Fees Fiscal Year 2019 Traffic signal system development fee Beginning System Development Other Balance Fees Collected Revenue $ 8,982,481 $ 2,239,233 $ Ending Expenditures 400,106 $ (391,086) $ Balance 11,230,734 Police system development fee 1,822,179 4,613,510 154,155 (3,466,337) 3,123,507 Fire system development fee (11,192,648) 2,445,412 - (1,032,887) (9,780,123) a General government system development fee (6,677,100) 3,036,275 - (2,187,115) (5,827,940) a Parks and recreation system development fee 30,415,318 9,632,004 1,100,229 (23,236,848) 17,910,703 Water system development fee 7,028,242 9,434,032 448,611 (10,208,555) 6,702,330 Water resources system development fee 2,145,388 3,118,916 60,035 (33,022,355) (27,698,016) b Wastewater system development fee 25,325,753 5,647,165 973,163 (7,676,436) 24,269,645 (81,221,619) $ 19,930,840 Totals $ 57,849,613 $ 40,166,547 $ 3,136,299 $ Equivalent Residential Unit Wastewater system development fee - Greenfield $ 3,182 Wastewater system development fee - Neely 1,933 $ Source: Gilbert Finance & Management Services Department a The negative ending balances for the fire and general government system development fees are funded by the general fund. The general fund had a cash balance of $126,712,257 at June 30, 2019. b The negative ending balance for the water resources system developmnet fees are funded by the water fund. The water fund had a cash balance of $114,793,547 at June 30, 2019. 145 TABLE OF CONTENTS Schedule 20 Town of Gilbert, Arizona Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year Tax Levy 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $ 30,389,882 $ 26,198,053 21,380,254 19,253,745 18,327,289 19,487,085 19,495,256 20,913,149 21,667,785 22,353,420 County Resolutions (153,319) $ (107,618) (96,162) (99,396) (57,876) (72,483) (32,290) (80,844) (53,647) (44,819) Initial Year Collections Net Current Tax Levy Collections Percent Of Levy 30,236,563 $ 28,984,405 26,090,435 25,253,466 21,284,092 20,772,494 19,154,349 18,962,640 18,269,413 18,056,441 19,414,602 19,230,809 19,462,966 19,286,314 20,832,305 20,645,301 21,614,138 21,411,196 22,308,601 22,129,563 95.86% $ 96.79% 97.60% 99.00% 98.83% 99.05% 99.09% 99.10% 99.06% 99.20% Source: Maricopa County Treasurer's Office 146 County Resolutions (390,788) $ (277,785) (217,974) (143,945) (89,343) (128,555) (80,173) (131,108) (72,239) (44,819) Cumulative Collections Net Delinquent Total Tax Levy Collections Collections 29,999,094 $ 25,920,268 21,162,280 19,109,800 18,237,946 19,358,530 19,415,083 20,782,041 21,595,546 22,308,601 997,246 $ 659,061 385,306 144,103 179,461 126,691 127,657 135,440 182,168 - 29,981,651 25,912,527 21,157,800 19,106,743 18,235,902 19,357,500 19,413,971 20,780,741 21,593,364 22,129,563 Percent of Levy 99.94% 99.97% 99.98% 99.98% 99.99% 99.99% 99.99% 99.99% 99.99% 99.20% TABLE OF CONTENTS Schedule 21 Town of Gilbert, Arizona Principal Property Taxpayers Fiscal Year 2019 Principal Taxpayer Type of Business Westcor Santan Village LLC Southwest Gas Corporation (T&D) American Furniture Warehouse Co. Vestar CTC Phase 1 LLC Power & Ray LLC Santan MP LP Target Corporation Liv Northgate LLC Earnhardt Arizona Properties LLC Breit Olympus Mf Redstone LLC Breit Olympus MF Vistara LLC AZ Flats at San Tan Apartments LLC 155 Rivulon Boulevard LLC Lowe's Hardware Inc. Verizon Wireless 275 Rivulon Boulevard LLC San Privada Apartments LLC Gilbert Road Owner LLC Arizona Public Service Company Branch Brook Gardens Santan Apts LLLP Smiths Food & Drug Centers Inc. Breit Olympus MF Heritage LLC LIT Industrial Limited Partnership Echostar Broadcasting Holdings Corp. Shopping Center Utility Retail Real Estate Development / Holdings Utility Real Estate Development / Holdings Retail Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Retail Utility Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Utility Real Estate Development / Holdings Real Estate Development / Holdings Retail Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Limited Property Valuation As % of Town's Total Limited Property Valuation $ 20,321,718 7,346,916 5,457,659 5,131,256 5,045,654 4,865,224 4,649,749 4,436,267 4,374,242 4,330,348 4,185,893 4,153,932 3,929,711 3,746,855 3,655,178 3,582,201 3,508,007 3,505,959 3,459,870 3,450,178 3,417,954 3,400,575 3,384,000 3,357,062 3,158,123 0.90% 0.32% 0.24% 0.23% 0.22% 0.22% 0.21% 0.20% 0.19% 0.19% 0.19% 0.18% 0.17% 0.17% 0.16% 0.16% 0.16% 0.16% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.14% $ 119,854,531 5.30% Source: Maricopa County; top taxpayers based on Net Assessed Limited Property Value of Real and Secured Personal Property for tax year 2019. Note: Information included for current fiscal year only as this is what is required for continuing disclosure requirements for Gilbert's bond issues. 147 50 E. Civic Center Drive Gilbert, AZ 85296 (480) 503-6871 | gilbertaz.gov